Jones Lang LaSalle


Positive Future Ahead for Industrial Market
March 27, 2006
By Katie Hinderer, Staff Writer

ProLogis Inc. will release its U.S. Construction Pipeline Report and the U.S. Property Market Review tomorrow, illustrating the continued strengthening of the industrial market across the country. "In some ways the most interesting thing is that the recovery of the warehouse markets is going full blast," said Leonard Sahling, first vice president for ProLogis Research Group.

"That's not new news, but people have been concerned it would fizzle out and it hasn't." Construction has surged, and 2006 estimates lie well above 2005's numbers. New deliveries in 2005 totaled 94 million square feet, and by the end of 2006, 127 million square feet are projected to come online, according to the report. "The fact that construction has perked up is significant," Sahling told CPN. "It has a lot of investors on the edge of their seat."

Vacancy rates continue to fall slowly but steadily in most markets. Rental rates are rising in some of the tightest industrial markets, including Los Angeles and Miami, but remain fairly stagnant in other areas. "We just aren't seeing much rental growth except in the tighter markets," Sahling said. But this could change in 2006. "Our best guess for the rest of this year is it will end up being a repeat of last year with declining vacancy and rising rental rates, but with less emphasis on vacancy," Sahling observed. "By the same token, we are expecting to see a broader base rent increase."