Rents are rising, especially for office space where the once theoretically predicted rent spike has proven to be very real, with rent increases of 10 percent to 20 percent taking place within less than a year. If all the planned hotels and office buildings were built, the Puget Sound area would again have a glut of space, values would fall and real estate owners would again feel dumb and homely. Values of the standing inventory of income properties have increased dramatically, not only because rents are increasing sharply, but because capitalization rates are falling which compounds the increase in value. Thus, the basic currents of general economy and real estate supply and demand are all moving in the same direction at once. To this one can overlay trends in the financial markets which simply add to the momentum.
Interest rates are low by historical standards, relatively stable with a flat yield curve.
Indeed capital is chasing real estate and there are more lenders than good deals. In the late 1980's this situation led to overbuilding that was driven by capital that wanted to be in real estate. The most important distinction that can be drawn between the late 1980's and late 1990's is that today's capital is not structurally capable of overbuilding the real estate markets. The result was that new buildings sprang out of the ground at an unprecedented rate with not enough tenants to fill them. This time, most of the new capital that is chasing real estate is not from the banks but from Wall Street.