"People are signing off certain assumptions because they have to move capital," says Larry Wyman, co-chairman of locally based HRO Asset Management. "But those assumptions are completely disconnected to the fundamentals of the assets and the history of the markets. On a national basis, we're seeing record pricing on a square-foot basis for properties that in many cases are in markets where the net rental fundamentals have only declined over the past 10 or 20 years."

Wyman isn't the only investor who sees trouble brewing. Another local expert, requesting anonymity, cited a Manhattan building that sold a few years ago for a trophy price and then suffered a cap rate-invoked slump in its NOI. "We're at historic lows in terms of both interest rates and cap rates," he says. "But everyone is seeking alternatives to the stock market, and they reason that even if they get a 5% or 6% return in real estate, that's good, and you can't lose on a hard asset."

But you can lose, he says, citing a local building that went for "$400 per foot. If the world is ever an 8% world again, you will need $37 net in that building, which carries $25 in operating and taxes. For that building to be worth $400 a foot, the rents are going to have to average in the low $60s, and that building's never signed a lease above $45."

As for Wyman, he believes a lot of investors are going to be disappointed in the long term. The trophy prices will continue "for a little while longer," he predicts, "and then something is going to happen. I don't believe that interest rates and cap rates can stay the way they are. We're experience pent-up inflation pressures that are going to bubble up. It may take six months or two years, but some event is going to occur. It is historically irresponsible to expect anything else."

As a result, the anonymous investor adds, over the next six months the industry is going to witness "some of the worst buys in the history of real estate."