AURORA, CO-Most of the nation's top 30 distribution markets are in good shape and are slowly getting better. That's the word from the latest US Property Market Review by ProLogis, the world's largest industrial real estate investment trust.
"Market fundamentals keep getting better, with the national distribution market having entered into that stage of the real estate cycle where pent-up demand completely overshadows new supply and drives the vacancy rate lower," says Leonard Sahling, head of the ProLogis Research Group.
According to the report, the top 30 markets showed that the overall vacancy rate declined to 9% at mid-year, from 9.7% at year-end 2004 and 10.2% at midyear 2004. Twenty-four of the top 30 markets posted declines in vacancy rates during the first half of 2005, including Atlanta, Austin, Dallas, Denver and the San Francisco Bay area.
Rents have leveled with rent concessions, such as free rent, fading. Rents have begun to edge up in a few of the tighter markets, but the "best that can be said for the vast majority of markets is that rents have stopped declining," states the report.
The surge in demand that occurred late last year extended into the first half of 2005. Companies may finally have become confident enough about the economic outlook that they are willing to unlock the reservoir of pent-up demand for space amassed during the protracted 2001 to 2003 US economic downturn, the report notes.
All but two of the nation's top 30 markets have now recovered in varying degrees from the steep downturn. Ten of the markets appear to have staged a full recovery: the Los Angeles Basin; Reno, NV; Las Vegas; Indianapolis; Phoenix; Seattle; Washington, DC; South Florida; and Orlando and Tampa, FL.
Two of the markets--Baltimore and Columbus, OH, are still floundering, the report notes, and are actually worse-off today than they were when the downturn in the national market for distribution space bottomed out early in 2003. "Thanks to the national distribution market's solid supply-demand fundamentals, the stage is set for continued tightening during the second half of 2005 and next year," reports Stahling.
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