A report from the New York Real Estate Journal. "Overall capitalization rates (cap rates) are always the topic of discussion in real estate appraisal circles. We are still in the midst of some of the most historically low cap rates in modern history. The cap rates are directly related to the lowest interest rates in my 43 years as an appraiser. The effect of the low interest rates has driven one of the most active real estate market in 30 years in the northeast United States. This is especially true in New York City where real estate values are exploding. Of course some of the older buildings like One Seneca Tower had some functional obsolescence because of age and had 850,000 s/f of space which makes it a large fish in a small pond. I use this as example similar to that of a 'canary in a coal mine' which is starting to lose oxygen."

"The point is; without more than low interest rates the success of smaller markets is dubious if there is not an influx of international capital, jobs and population. The Federal Reserve Bank headed by Janet Yellen is expected to increase rates before the end of the year ever so slightly which should result in continued low cap rates which will keep sales activity and prices relatively high even in the secondary markets."

"However, the Federal Reserve has some of its own problems. Their holdings of U.S. treasuries, etc. are approximately $6 trillion. This is an increase of over 600% over the past 7 years. Some think this is a house of cards or type of Ponzi scheme; and is a policy which is not on solid financial ground. However, this strategy has kept interest rates artificially low which not only has encouraged borrowing for new projects but also boosted the stock market to record highs and real estate cap rates at all time lows."

"One thing is for certain; real estate activity is still at near record levels in the big markets and smaller metropolitan areas in part because of low interest rates and government intervention for the foreseeable future. However, look out for the 'canary in the coal mine' example like Seneca Tower in your local market which may fuel a major change in Federal Reserve policy and cap rates."

From Bloomberg. "Heightened scrutiny of U.S. commercial real estate lending is paving the way for lightly regulated investors to gain a bigger toehold in lucrative deals. Private funds are seeking a record $32 billion for commercial-property debt as buyout firms, real estate investment trusts and hedge funds expand lending. These companies, which typically charge higher interest rates, can move quickly on large loans that may be seen as too speculative for banks."

"With banking regulators warning of a potential real estate bubble, firms such as Blackstone Group LP and Starwood Property Trust Inc. stand to become an even larger force in the market. So-called shadow banks -- lenders that fall outside of the industry’s oversight -- are able to take on more risk amid calls for caution in an area that melted down during the 2008 financial crisis."

"The record capital being sought by U.S. private funds for real estate debt investment as of July was up almost 40 percent from a year earlier, according to data researcher Preqin Ltd. Banks, by contrast, are pulling back as slowing global economic growth, uncertainty over interest-rates increases and pockets of overbuilding spark concern that commercial real estate prices are due for a fall after almost doubling in six years."

"In Manhattan, where a surge of construction has led to a glut of luxury apartments, Blackstone extended a mortgage originally made for $285 million on a condominium tower being built by Gary Barnett’s Extell Development Co. when the developer couldn’t pay off the loan on its Aug. 9 due date. Nonbank lenders 'trust their own instincts,' said Steven Delaney, an analyst with JMP Securities LLC. 'Blackstone is the largest owner of real estate in the world,' he said. 'They don’t need regulators and the Fed to tell them what the state of the real estate market is.'"

The Philadelphia Inquirer. "With a 7 percent increase from August 2016 to September 2016, Philadelphia is third on a list that only landlords could like. According to rental agency Abodo, the hike puts Philadelphia on a list of U.S. cities where rent has increased the most, second only to Bakersfield, California and Miami, Florida. The same report indicated big dips in Seattle (down 13 percent) and San Jose, California (12 percent)."

The San Francisco Business Journal in California. "San Francisco is seeing fewer market-rate housing proposals as rents have softened and a major policy change more than doubled the affordable housing requirement, according to an analysis of city planning data. The slowdown is a sign that the city's real estate boom may be fading even as the city pursues more concessions from developers to fund affordable housing."

"A Socketsite analysis of the city's development pipeline in August found that the number of units proposed, approved and under construction fell slightly by 100 to 63,300, as new applications fell relative to completed projects. Companies that track rental prices such as Apartment List and Zumper have also reported dips in the past few months in San Francisco rents."

"'I will say that as a result of (Prop. C), the land market for residential housing is kind of locked up right now. We're in the market every day, and it's very difficult to transact,' Jesse Blout, principal of developer Strada Investment Group, said at the Business Times' San Francisco Structures event last week. 'Part of that is because land owners are used to a certain level of pricing.'"

"The city's current housing production is still near a record high and outpaces previous cycles of growth, and supporters of more development say that increased supply gas helped lower rents for the high end of the market. Major landlords such as Equity Residential have offered new renter concessions such as a free month of rent as thousands of new units have been completed in the South of Market and Mission Bay neighborhoods."