The word "bottom" occurred twice. Stuart Williams at Pacific Real Estate Partners in Bellevue, WA, likes the phrase "bumping on the bottom." Jim Wadsworth at United Properties in Minneapolis, MN, reports his favorite description from a suburban office broker, "hopeful bottom."

Dalrymple Scott at UBS Realty Investors in New York City correctly pointed out that my simplified analysis ignored the time value of money and wondered what discount rate landlords typically use. He's guessing that it's 10%. In this case, he argues, the discount rate is probably below many firms' Weighted Cost of Capital (WACC), which means that landlord financing "may be the cheapest source of long and medium term fixed rate funding."

Hugh Kelly, the dean of real estate economists in New York City, writes, "The dynamics of the Manhattan Market over the past forty-plus years have convinced me that rents are established at their peaks by a function of construction costs, but in 'soft markets' rents are a function of operating expenses and, perhaps, a thin spread." ... To quote J.P. Morgan (I think): "My prediction is that the market will fluctuate."

--Peter Pike