Kurt Rosene
Sr. Vice President
Alter Group
Phoenix

If you've ever attended one of Real Estate Media's RealShare events, you've heard the statement. We've peaked but we don't know it yet. A staple of the Fact or Fiction segment of the conferences, the statement has now served double duty, serving as last week's Feedback Poll question, and it garnered some interesting responses. In fact, 54% of our readership say yes indeed, the champagne is considerably flatter than it was when the party began. Well, there are some signs ahead, but commentator Rosene--himself a recent participant in a Fact or Fiction segment--believes that the festivities aren't over yet.

"I disagree with the statement. I think we can see the peak of the mountain, and by my estimate the peak will occur in 2009, although I would suggest that there are different markets and different things are happening nationally.

"One of the things driving the market is capital, and it hasn't turned off. That's going to allow development to maintain its course. But capital is fueling so much development that we will be overdeveloped by 2009. Projects are in the ground, and there are more to be completed in 2008. By the time 2009 rolls around we will have an oversupply.

"The other thing--and it's not only affecting the outlook but will actually have a more dramatic effect on development in the future--is land prices. I've seen prices that have escalated over the past couple of years and are still escalating. Candidly, there are many markets in the US where the rents haven't come close to catching up with land pricing or production pricing, and that's made it prohibitive to develop in some places. People are looking for solutions to this, but as we get into 2008 it'll become much more difficult, and by 2009 there's going to be big slowdown.

"A lot of the development community and the capital markets are incentivized by spending dollars. Everyone figures they won't be the ones holding the bag."