Delta Associates CEO Greg Leisch (snapped at our BMAC West event earlier this year with CG Design and Development's Catherine Guentert) doesn't like to use the word "bubble." But there are some serious supply-and-demand questions. The nation's capital has seen solid job growth, but fewer of those jobs are office using, he says, creating major demand problems. "It's been happening for five years, and probably will for the next five," says Greg, who adds that federal cutbacks and office tenants in DC using less space per employee also cut into demand. But in a 400M SF office market that contains 250M SF of essentially obsolete space, developers still have an incentive to bring new, efficient space to the market, he adds.

Other markets, like Houston (pictured) are running into oversupply. Driven by booming growth in the energy industry, Houston has 17M SF of office under construction—equal to 7.5% of the city's total existing inventory. But with absorption hovering around 3M to 3.5M SF per year, developers there may be in for some lean years trying to lease buildings up, Greg says. New York may have a similar supply problem, but it's concentrated in Lower Manhattan. But not every major market faces such issues—Greg says Chicago is in equilibrium, since the debt and equity world has been hesitant to finance new office construction, and the new office supply of Dallas is basically in equal step with demand.

But even with supply concerns in the DC area, some jurisdictions are doing everything they can to encourage office development, Greg says. Falls Church is spending millions to incentivize new office construction, since it believes it would generate more financial benefits than costs.