Logistics Hubs:

Report Highlights Market 'Leaders'

Site Selection Online

January 2005





Chart: ProLogis



DENVER, Colo. ? Lower leasing rates have contributed to a rebounding industrial market in several major American cities, according to a new report by the ProLogis Research Group.



The new market "leaders" in the distribution-warehouse sector, according to the Denver-based company, are the Los Angeles Basin, New Jersey, Las Vegas, Reno, Seattle and St. Louis.



These six markets are followed closely behind by another improving pack of six: Indianapolis, Nashville, Southeast Florida (Miami-Fort Lauderdale-West Palm Beach), Memphis, Phoenix and Portland, Ore.



"Surprisingly, in light of the slowdown at the national level, there are twice as many `fast-track' markets today as there were six months ago ? six versus three," said Leonard Sahling, first vice president of the ProLogis Research Group.



The report calls for "cautious optimism" as the U.S. industrial market heads into 2005. Other major findings of the report include:



? For the 30 U.S. industrial markets, the overall vacancy rate eased to 10.2 percent at mid-year 2004 from10.5 percent at year-end 2003.



? The rate of the recovery of the nation's warehouse and distribution markets was likely remain moderate through the end of 2004.



? Market rents have ceased falling but have not yet begun rising, with a few exceptions. In general, market rents are not likely to head higher until the overall occupancy rate recovers to about the 91 to 92 percent range.



? Industrial rental rates are increasing in the following markets: Los Angeles County, the Inland Empire (Ontario, Calif.), New Jersey and Reno.



"While new warehouse construction is on the upswing, its pace could best be described as conservative, as developers are exercising unusual restraint and discipline at this early stage of the cyclical upturn," the report noted.



As for predictions, the report expressed mild optimism: "The consensus macro-economic forecast calls for continued real GDP growth in the 2.5 to 3.5 percent a year range during the second half of 2004. In this event, net absorption nationwide should remain positive during the second half, and the overall vacancy rate should continue to edge down."



For emerging logistics hubs ? those secondary markets that are seeking to become top-tier industrial centers ? the ProLogis report comes as good news. As rents stabilize and absorption accelerates in just a handful of large industrial markets, more logistics space users will turn to secondary and tertiary markets for good deals on space.



From St. Lucie County and Polk County, Fla., to pockets of Northern California like Stockton and Sacramento that means logistics space users will be spending more money on new facilities along prime transportation corridors.



For examples of places where this trend is accelerating, read the following Special Advertising Section titled "Emerging Logistics Hubs."



To read more of the story go here ----> Site Selection: Logistics Hub Leaders