This is Part 2 in a debate with the Flat Earth Society

This is Part 2 in a debate with the Flat Earth Society. Please read Part 1 first if you have not yet done so. This debate came about when I informally responded to the Salt Lake Real Estate Blog on Silicon Investor. Salt Lake (SL) then sent out a 'challenge' along with a rebuttal to my brief responses. Part 1 of my response discussed Corporate Balance Sheets and Real Estate Appreciation. Part 2 of my response discusses Building Costs and Rents. My responses were broken in half simply because the amount of material supporting the notion that corporate real estate expansion is NOT about to pick up where residential real estate left of is massive. Even broken in half, each piece is lengthy. Part 2 now resumes with a discussion about Building Costs and Rents. Building costs are coming down / Projects are being restartedSL: With residential real estate waning, costs of building have come down to the point stalled building projects are being restarted. Mish: There is a desperate need to finish stalled projects just to get rid of the carrying costs. Then what? Why is commercial capacity needed? It isn't is the correct answer. SL: I didn’t say commercial projects were desperate. I said they had been stalled due to higher costs brought on by the residential boom. BusinessWeek’s blog said:During the housing construction boom, homebuilders bid up the price of construction labor as well as building materials like copper and cement. Prices got so high that some non-residential construction projects became unaffordable, so developers put them on the back burner. Now, with residential construction slowing down, labor and materials costs are coming down, making non-residential projects affordable again. This makes sense to me. How about you? Additionally, government construction rose to an all time high in October:Public construction, namely government building projects, rose 0.8 percent to an all-time high of $273 billion. Federal construction saw an 11.6 percent boost in spending. Most supportive of the theory residential construction jobs will be absorbed by commercial construction is the fact the hardest hit bubble areas including Denver and Los Angeles are seeing huge commercial growth. Mish: Yes building costs dropped. That is called lack of demand. In fact here are charts of Lumber and Copper. LumberCopperExactly what is Dr. Copper and Lumber telling us? To me it is obvious. This economy is in trouble. At any rate collapsing commodity prices is certainly NOT any indication of demand. It is an indication of weakness. What you are seeing is a mad scramble to finish some projects that were stalled due to costs. That real estate when finished will just add to additional supply. But even as you state projects are being restarted you provide no examples while cancellations are everywhere. Here is a typical one. Please consider Developers rethink plans in slow market. Ok So Palm Beach is just one city. But projects are being canceled in Las Vegas, San Diego, Boston, Chicago and other places. Do a search. You will find them. But let's zero in on some rock solid hard data: Builders are taking enormous writeoffs on land. If land was cheap or expansion was coming, builders would not be bailing hand over fist on land options, and/or taking other land writeoffs. Here is a typical article on the subject: Homebuilders Take Another Hit. Shares of industry players dipped Tuesday after Hovnanian posted a big quarterly loss on a hefty land write-offFinally, just because some cheerleader states 'labor and materials costs are coming down, making non-residential projects affordable again' does not really make it so, now does it? Even if it was so (from a construction standpoint) that does not make the projects viable from an overall economic point of view. Overall viability must be factored in and overcapacity is rampant. Summary