"[The year] 2005 will be a record transaction year for Denver," Devereaux, who has sold $850 million in properties over the past decade, tells GlobeSt.com. Devereaux says the same factors that are driving the record investment activity across the country are at work in Denver. But unlike some other cities, such as Los Angeles or New York, the "market fundamentals and pricing continue to be out-of-sync in Denver," which still has relatively high office vacancy rates and lease rates, he notes.

Still, commercial investment demand is at historically high levels, with investor yield requirements continuing to decline as competition increases, he says. The 10-year bonds stood at 3.99% at the end of June, compared with 6.67% at the end of January 2000, he notes. If the 10-year bond yields stay near their historical lows, it will continue to drive down cap rates, he says.

On the positive side for the city, its job growth and unemployment trends are out-pacing the nation, Devereaux says. Favorable national press on Denver has helped bring more investors to the market, he says. Today, private capital is accounting for 50% of the transactions.

Devereaux predicts capital flows to commercial real estate continuing and maybe even increasing. Moderate interest-rate increases will not impact pricing because the demand for income-producing properties will more than make up for rising rates. Demand, he notes, will have more impact on pricing than interest rates. And as market fundamentals improve, cap rates will decline, he says.