When Albert Einstein was a child, he read a book that described the experience of sitting on a train and watching another train moving outside the window. You may have had this experience yourself. If the other train is moving and your train is still, or vice versa, it is very difficult to tell which is the moving train because the appearance depends upon your perspective. Instead of imagining himself sitting on a train, Einstein wondered what the universe would look like like if he were to ride on a beam of light. It was this imagined perspective that lead to his Theory of Relativity.

PricewaterhouseCoopers recently released their final 2006 Korpacz Report which provides an analysis of the office and industrial real estate markets. They describe them as having "a continuing positive outlook " and that the market "continues to show signs of improvement". OK, that's great.  Right? Well...for who?

This is great news for investors. The tightening market means that there is opportunity to raise rental rates beyond traditional inflationary rates, justifying the shockingly low cap rates offered for investment properties over the last few years. This will last at least as long as higher construction prices make new construction unfeasable to compete with existing product.

This is not great news for corporate users, who must bite the bullet and face increased rental rates sometimes as much as 25% over previous rent payments. Almost universally, when a news article talks about a "strong market" or "positive outlook", they are talking from the landlord's perspective. So is all of this postive news killing your profits? If so, remember this: Real estate is cyclical.

We don't know when markets will change, although we know that they will change. If you have leases coming due in the next two years, and they haven't started clearing the land for buildings that you might occupy, you had better start negotiating for space today. Because in another year and a half when you are in the market, there will be less choices than there are today. Plain and simple.