CHICAGO—Several years ago, the landscape was dotted with recently-completed but empty industrial structures that, due to an unrealistic optimism, developers built just before the bottom of the market dropped out. And one of the most-discussed topics yesterday at BMO Capital Markets' 10th Annual North American Real Estate Conference was whether or not the market had once again become too exuberant. But leaders of some of the continent's major REITs generally felt that a return to those bad old days was not on the horizon.

“Historically, overbuilding is something you need to pay attention to,” William Hankowsky, chairman, president and chief executive officer of Liberty Property Trust, said at a morning panel on development opportunities. But, these days, “lenders are a little more cautious,” and this tends to put the brakes on the type of exuberance that overtook the industry in 2007. “It doesn't really exist the way it used to.”

Furthermore, he added, these days “customers very much want state-of-the-art product. They don't want that low ceiling height,” or other obsolete features, and this desire is fueling demand as the economy continues to recover. “I don't think we run the risk of overbuilding.”

The discussion moved onto how migration into urban cores, especially by the millennial generation, was transforming several sectors, including industrial, retail, office and residential. Heather Kirk, a managing director of Canadian REIT Research, BMO Capital Markets and the panel's moderator, asked whether, in light of this urbanization, the suburbs were dead.

“I don't think the word 'dead' should be used,” said Donald Clow, president and chief executive officer of Crombie REIT. His company has many well-located sites in downtown Vancouver and Calgary, and has seen their value increase tremendously due to urbanization, but it still believes the suburbs hold value.

Hankowsky said people should recognize that urbanization is not the single cause of the suburbs' real estate troubles. Much of the suburban product is obsolete, but just as the adoption of urban lifestyles by the millennial generation creates opportunities for new downtown residential, retail and office product, he expects developers to do a lot more repositioning of the older suburban product “in order to make it an attractive alternative.” After all, there is significant demand for great product, even outside the downtowns. “Our class A suburban space is 95% leased.”