Replacement costs is one factor that might affect a new price structure. "Everybody is careful now at looking at them" when investing in a new asset," the Atlanta executive says.

Even with a slowdown, McWhirter says "we're still feeling very good about office markets such as Atlanta, Dallas, Denver, Phoenix and Orlando, although we are starting to get a little cautious about Orlando."The four-member panel agreed cap rates are rising and most pension funds have over-allocated office product on their investment agendas.

"I am seeing cap rates going up 25 basis points to 75 basis points" in the past 60 days, says Manuel de Zarraga, managing partner of New York-based Sonnenblick-Goldman. Cap rates have hit the 11% mark in some markets.

Opportunity funds have about $100 million of assets to sell before year end but de Zarraga thinks they may not make the deadline. "They're up against a wall now because cap rates are going up," he says.

Flight capital is still coming in strong to this country from Venezuela, Argentina and Columbia "but these investors are willing to partner only with people they know here and have done business with, such as lawyers and their law firms," says de Zarraga.

Venezuela alone has pumped about $8 billion into American commercial real estate investments in the last 60 days, the Sonnenblick-Goldman executive says.

Scott Kempton, an investment specialist with the $320 billion asset, New York-based Teachers Insurance and Annuity Association of America, feels the slowdown in office sales is short term. "People don't have to sell right now so they're not selling," Kempton says. "They're holding off until the first of the year.

"We are currently looking at properties in Chicago, New Jersey, Atlanta, Dallas and Dade County in South Florida, but I can tell you the price per square foot in South Florida is very expensive right now."

For example, properties his firm could buy in Chicago, New Jersey, Atlanta and Dallas for $35 per sf to $40 per sf are running $65 per sf to $75 per sf in South Florida.

"We would love to buy at high cap rates but there isn't that much quality product available," Kempton says. "Many of the properties are less than the high-quality product we are looking for."With a real estate portfolio of $25 billion, Teachers Insurance and Annuity still averages $6.5 billion in annual investments. "We have $150 million left to invest by year end," Kempton says.

David J. Gilbert, a general partner with New York-based Chase Capital Partners, agrees with Kempton on the availability of quality product.

"Even at 11% cap rates, we have hit this kind of a quandary in markets such as Boston, New York, Austin, TX and Northern Virginia," Gilbert says. "It's not as easy as it used to be to put in some added value and take some leasing risk" on potential investments. In first-tier, 24/7 markets, for example, "we look for a return of 20%."

Steven Pumper, president of Owner Advisory Services/Transwestern Commercial Services in Dallas, says most deals of $25 million or more are "club deals that become syndication loans because banks are talking to each other more than they previously did."

Pumper moderated the capital markets update session.