DENVER—Despite recent upheavals in credit markets, conditions for industrial developers remain stable throughout the U.S., according to a recent research report from distribution facility developer ProLogis.
The report, “U.S. Property Market Review” is one of two reports just released by the owner and manager of industrial space throughout North America, Asia and Europe.
Average industrial vacancy rate across the country's top 30 markets remained at 7.6% in the first half of 2007, unchanged from the prior period, the research revealed. However, asking rents rose at a 6.6% annual rate during the first six months of the year.
The second report released by ProLogis, called “U.S. Construction Pipeline Report” revealed that starts totaled 67 million square feet, compared with 63 million square feet in the latter half of 2006. Full-year starts for 2007 should total approximately 2.5% of existing inventory, ProLogis predicts. The company added that the figure is low by historical standards.
The developer also reported that asking rents have climbed by close to 50% over the past two years in Tampa, Fla.; Phoenix; and Orange County, Calif. Asking rents have risen by 20% in 10 of the top 30 markets since the second half of 2005. Additionally, about 81% of the buildings under construction at mid-year were “inventory projects,” while only 19% were build-to-suits, according to ProLogis.
"When the dust settles, we expect the industry's access to debt capital will remain intact, albeit with higher borrowing rates and more stringent credit terms,” said Leonard Sahling, ProLogis’ first vice president of research.
"The nation's distribution property markets are holding up well amidst this year's more difficult economic environment," he added. "Overall demand for high-quality space remains healthy, while supply is constrained by the collective restraint of industrial developers nationwide. We expect average rents will continue to climb in property markets where those preconditions persist."