The overall vacancy rate for the US and Canadian bulk distribution space across the top markets edged down to 10.2 per cent during the second quarter of 2010 from 10.4 per cent in the first quarter of 2010, after having been virtually flat during the two previous quarters.

This is according to a research report by ProLogis, a provider of distribution facilities, on the state of the industrial property markets in the US and Canada.

Total occupied space (realised demand) climbed 15 million square feet during the second quarter of 2010, a modest 0.2 per cent increase, but still well above the tiny gains posted in the previous two quarters.

Asking rents in the major markets slipped 1.6 per cent on average in the second quarter of 2010, their ninth consecutive quarterly decline. Asking rents are now 18.4 per cent below their cyclical peak in the first quarter of 2008.

New completions are on track to set a new record low in 2010. What few new starts there are consist almost exclusively of build-to-suit projects for specific customers.

In view of the mounting losses on their commercial real estate construction loan portfolios, it is doubtful that US banks will be willing to provide construction financing for new commercial real estate projects for the next several years, the report says.

Looking ahead, some real estate analysts are contemplating the possibility of rent spikes within the distribution property markets in 2012 or 2013.

"By midyear 2010 the nation's distribution property leasing markets were finally showing signs of recovery," says Leonard Sahling, first vice president of the ProLogis research group. "With the US economy on the mend and with very little new supply in the pipeline, the stage is set for a continuing recovery in the nation's distribution property leasing markets."