Study Finds Little Basis for Office 'Bubble'

Speculation about a "bubble" in some prominent office markets has little basis, according to a study conducted by Grubb & Ellis, PNC Real Estate Finance, and Real Capital Analytics.The researchers concluded that "the headline-grabbing activity is limited to a small set of investors buying the best properties in a handful of markets," rather than being a widespread problem. One survey respondent noted, "For every investor who thinks there’s a bubble, five others outbid him," the researchers said. Bob Bach, national director of market analysis at Grubb & Ellis, said the findings "clearly indicate that investors are exhibiting rational exuberance as they consider investment options, choosing to buy the best assets in the best markets for high prices in order to avoid market risk." This, he believes, is "a rational response to historically low mortgage rates, the lack of compelling investment alternatives, and the willingness of investors to trade lower yields for lower risk in the post-bubble. post-Enron era." The study found that investors are bidding aggressively on "the right properties" in the District of Columbia, Midtown Manhattan, and Southern California.