People
Through close ties with customers and brokers in their local markets and frequent communication with colleagues around the globe, our leasing and development professionals have a unique ability to monitor market conditions and identify opportunities.
Our people achieved solid leasing results in our development portfolio during 2009. At year-end 2008, we set a goal to be 60 to 70 percent leased in our development portfolio. By the end of 2009 in that same portfolio, we reached 68 percent leased — at the top end of our range — despite difficult market conditions. We expect 2010 will continue to be challenging. While global industrial demand remains relatively soft, occupancies seem to have stabilized, and customer activity has increased. This improvement is offset somewhat by continued rental rate declines, which historically lag occupancy trends by a few quarters. We believe rental rates will continue to be below in-place rents throughout 2010, although declines have begun to moderate.
There is cause for optimism. On the supply side, there is virtually no new development underway or in planning. With a six-month construction cycle, developers can react quickly to market conditions and adjust supply. Builders did just that in 2009, with the lowest level of starts in 25 years, and 2010 looks to be more of the same.
We also are encouraged by the prospect of continued real U.S. GDP growth, which is closely correlated with demand for distribution space. In Europe, the ongoing evolution of supply chains and migration of manufacturing jobs to the east increases consumer buying power and drives demand for goods. And in Japan, despite a prolonged period of flat growth, functional obsolescence supports the need for more efficient facilities. Additionally, in most markets around the world, population growth will continue to drive demand complemented by consumers’ desire for greater selection. With our people in place throughout the world, we are well positioned to capture this demand and serve our customers.
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