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DENVER-Industrial vacancy in the US is falling and development remains disciplined, according to two new semi-annual research reports released by ProLogis Trust. The locally based distribution REIT owns approximately 400 million sf in 2,000 properties worldwide.

“The near-term outlook remains upbeat for industrial real estate,” concludes ProLogis’ first vice president of research Leonard Sahling. “As long as the US economy continues to grow without interruption, so should the cyclical upswing in the nation’s warehousing and distribution markets.”

The company’s US Property Market Review indicates that conditions will continue to improve for developers of industrial distribution space across the US. Through the first half of the year, industrial vacancy rate across the country’s top 30 markets fell to 8% from 8.8% at mid-year 2005, while asking rates increased 8%.

ProLogis’ second report, on the construction pipeline, indicates that while industrial development is on the rise, it remains disciplined. New industrial starts in the US are projected to reach 130 to 140 million sf in 2006, or about 2.6% of existing inventory. Concurrently, construction costs are up sharply (no figure was supplied) and may increase as much as 15% by the end of the year, according to the report.

“Leasing market conditions have tightened to the point where property owners are now in the driver’s seat, with enough leverage to begin pushing rents higher,” says Sahling. “Our projections call for the national vacancy rate to recede below 8% by year end, paving the way for sustained, broad-based rent increases.”

ProLogis says the two reports are based on market data compiled from a variety of sources, including ProLogis market officers, brokerage companies and data vendors. Here’s a bulleted look at the highlights of the reports:

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