Market Momentum Memo... . "Buyers are largely remaining rational, and chances of a pricing 'bubble' are remote. But even if one existed, it would be unlikely to burst anytime soon." That's from Rationalizing High Prices,
a Grubb & Ellis white paper
(Aug 2004).

Prepared by Bob Bach, National Director, Market Analysis at Grubb & Ellis, the report reflects the collaborative efforts of G&E and its two research partners, PNC Real Estate Finance and Real Capital Analytics.

According to the report, "At the present time, optimism appears to be exerting a stronger influence on investor sentiment than interest-rate inspired pessimism." Not a real surprise, but here's the intriguing part.

Check out the graph in the report titled "Leasing Versus Investment Market Momentum" (page 5) -- partially shown above. The horizontal axis represents Leasing Momentum (how fast the market is tightening); the vertical axis represents Investment Momentum (how fast prices are rising).

Guess what? "Because the markets are scattered across the graph and not grouped along a trend line, this graph suggests that investor demand is widespread and not closely linked to leasing market fundamentals, at least at the metro market level."

However, Bach writes, "The relationship may be tighter at the submarket or individual asset scale." Isn't it strange that investor demand seems so poorly correlated to the strength of the leasing market?

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--Peter Pike