"For the first time in four years, the national vacancy rate for office buildings rose in the fourth quarter, as an unusually large amount of new space came on the market and tenants shied away from signing new leases. ... Only last summer, commerical brokers were warning tenants that they needed to sign leases quickly at top rents because space was scarce", WSJ, 7 January 2008.
The rental-sale ratio indicated California real estate was overvalued. Over about the last 500 years, house prices have averaged about 110-120 months rent. At its peak, Southern California's ratio was 210. It was like buying technology stocks at 100X earnings. A likely way to lose money. Posts worth reading on these items are at http://www.calculatedrisk.blogspot.com/ on 2 and 6 January 2008. In a 29 Ocotber 2007 post, I referred to an article by Jeremy Siegal, a Wharton professor, about the dangers of buying high PE stocks. Similarly, it's dangerous to buy "high PE" real estate.