The commercial real estate market has exploded because the capital markets have appropriated a larger % of dollars away from the stock market and into real estate. The values have exploded from cap rate compression. Properties that have had inflaionary rent increases only have doubled in value due to the decrease in cap rates. If interest rates rise, cap rates will rise. If cap rates move to 8 in the next few years, it will flush out the investors that paid too much for their investments.
It will be an interesting next couple of years, because the prices that some investors have paid will demand a large rent increase when the leases rollover. If the job market has a hiccup, this could steamroll a large commercial real estate bubble.
I believe the markets will remain in tact for the next 24 months, but expect some serious changes thereafter.
