Greenspan takes shine off of rosy predictions.

At CB Richard Ellis breakfast forum last Friday, New York region chairman John Powers predicted continued strength in the city's commercial real estate market, but guest speaker, Alan Greenspan, tempered pearly predications by warning of ominous trends relating to energy prices that could have a profound impact on the economy.

Strong economic growth over the past few years has been one of the primary factors credited with lifting the real estate market from its post 9/ 11 doldrums.

Despite an increase in oil supply in recent years, oil spot prices have been driven higher by a futures market in which there can be no accurate prediction of capacity because of a lack of transparency in the calculations for oil reserves--a situation preserved by the conglomerate of mostly nationalized oil companies that control the bulk of the world's oil supply and who stand to profit from the illusion of a shortage.

"The world's oil reserves are calculated by someone who watches how many oil tankers go by and estimates how much oil they must be carrying by how low they are sitting in the water," Greenspan said. "I've compared accurate records of oil reserves with estimates and there is a great difference."

The ongoing rise in energy prices has started to have an effect on inflation. According to a Department of Labor report released last week, the consumer price index rose beyond forecasts for the second straight month in April. The index increased by 0.6 percent, sparking speculation that the Fed may have to continue its series of interest rate hikes.

The low interest rates and strong economic growth of recent years have contributed greatly to both the rise in commercial real estate value and the improvement in real estate metrics such as vacancy and rental rates in major office markets like New York City. Before the news of the CPI increase, the Fed seemed to hint at its May 10 meeting, in which it bumped rates by a quarter point to 5.0%, that it might suspend further increases.

"As yet, the run-up in the prices of energy and other commodities appears to have had only a modest effect on core inflation, ongoing productivity gains have helped to hold the growth of unit labor costs in check, and inflation expectations remain contained," the Fed said in a statement released after the meeting and before the Department of Labor inflation report.

Analysts now predict that short-term interest rates will rise to 5.5% by September.