According to Transwestern's 2007 year-end report, the officeinvestment market chalked up $3.1 billion in total sales volume or$1.1 billion more than 2006's total sales. In fourth quarter 2007,investors spent $594 million, which averaged out to $195 persf.

Researchers caution price appreciation should level off as newsupply comes on line in the next 24 months. For the past coupleyears, Melinda Korth, an executive vice president in Phoenix for CBRichard Ellis, says "buyers were getting great loans and securingdeals, meaning sellers realized they could push prices." As aresult, she there were sharp spikes in asset prices. "If 2008 slowsdown from those levels, it won't be a catastrophe, but the way tobring things back into balance," Korth says.

Eric Wichterman, senior vice president with Grubb &Ellis/BRE Commercial LLC's Phoenix office, points out office mostlikely will weather an economic downturn better than other producttypes because deals weren't based on pure speculation. "People wereoptimistic in their assumptions when the cap rates dropped," heexplains, "but it wasn't anything like the catastrophicirrationality we had in the housing markets."