Sublett: I am fortunate to have a region that is growing and very dynamic with numerous specific markets that are the envy of the country in terms of job growth and overall economic health. Clearly, some markets are seeing substantial construction, which brings a concern of overbuilding. We monitor the balance of construction, absorption, job growth and population growth on a market by market and then we drill down into the market on a real time basis to see what is occurring.

I would say that increasing construction is the number one trend that I monitor followed by cap rate compression. With a substantial amount of capital flowing through the system at this time we are seeing cap rate compression and the question is whether this continues, stabilizing or reverses. Certainly the Fed policy with regard to quantitative easing has a significant impact on this issue as the relationship between interest rates and cap rates cannot be ignored.

GlobeSt.com: In your opinion, what are the strengths and weaknesses of the Southwest?

Sublett: It is difficult to put all of the markets within the Southwest region into one bucket, but overall the strength of the region is better employment and job growth than the country overall. Many of the markets in the Southwest are seeing significant job and population growth, which is the underlying fuel that powers the economies of each market and the real estate. Job and population growth put residents in the apartments, tenants in the office buildings and drive sales for the retail tenants. Certainly there are factors that drive the job and population growth such as climate, tax environment and labor supply but an underlying pro business atmosphere is a significant driver.

One of the weaknesses is the boom and bust markets within the region. Clearly, the energy sector is a major driver in Houston and the greater Texas market and the sustainability of that growth is a major concern. Markets like Houston and Austin have been boom and bust markets going back several decades with a propensity to continue this trend. This is further fuelled by the fact that many of the Texas markets have been dominated by merchant builders as opposed to long-term holders of real estate. The concern with merchant builders is that a builder and seller of an asset is less concerned with the ongoing viability and stability than a holder of the real estate, which further exacerbates the boom and bust of these markets