Publications

- June 2011: Vol. 23 No. 6

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Don’t Rain on My Parade: Pricing for Trophy Office Properties Zooms Ahead Despite Slow-Moving Fundamentals

by Larry Gray

1 The financial markets are moving fast, and the run-up in asset values reflects growing investor confidence based on positive economic sentiment. Strong corporate earnings reports and an improving employment picture have supported the advancing public equities bull market, while a nascent recovery in the commercial property markets is fueling record pricing for trophy assets in the office sector. Encouraging economic news and a wave of yield-hungry capital are pushing values ahead of fundamentals, despite the U.S. economy’s numerous major challenges and potential pitfalls. First quarter 2011 GDP growth slowed to an estimated 1.8 percent from the 3.1 percent rate established in the final three months of 2010. However, economic growth is expected to accelerate in the coming months. Economists predict consumers will spend more freely as the year advances. Higher stock market prices are making people feel wealthier, and a Social Security payroll tax cut lets consumers ke

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