Did the $36 billion sale of Equity Office Properties Trust (EOP) signal the top of history’s most buoyant commercial real estate market?

Not to EOP chairman and founder Sam Zell, who asserts that the dizzying sums being shelled out for commercial real estate are largely justified — and likely to continue. But the legendary real estate tycoon, who last week was the keynote speaker at New York University’s 12th annual REIT symposium in Manhattan, gives this thriving market another two and a half years at best.

“If I were a betting man, I’d look to the first quarter of 2009 with some degree of skepticism,” said Zell before a packed ballroom of industry executives and real estate students at Manhattan’s posh Pierre Hotel. “New presidents tend to want to take their medicine early, and we’ll be coming to the tail end of a very strong recovery,” he said, referring to the year that will follow the 2008 election.

Have we perhaps already reached the tail end of this boom cycle? Zell acknowledged that many people interpreted the EOP sale as “some esoteric decision [that] I made that the end of the world is coming.” But he claimed that wasn’t his motivation, dubbing the EOP sale “a unique event at a unique time.”

Zell reportedly walked away with several hundred million dollars from the sale, which represented one of the largest buyouts in U.S. history. EOP investors also did okay on the deal, too. And Blackstone, which many people accused of overpaying for EOP, has already sold several billion-dollar chunks of the portfolio to a slew of buyers.

“But we really can’t lose sight of the fact that we’re in a very frenetic market,” he said. “And we have to watch carefully and not get caught up in a new form of euphoria.”

Zell singled out over-zealous real estate lenders. Admitting that this is “for sure a debt-fueled real estate boom,” Zell offered up one example of how lenders are tripping over themselves to finance deals. Back in 2003, Manhattan’s GM Building hit the market. According to Zell, he immediately received two phone calls after owner Conseco put the 50-story up for sale.

“One call was from lender A. The other was from lender B. Lender A says we have $1.1 billion available for the buyer and here are the terms. Nobody talks about anything other than the debt. In past periods, that was not the case,” said Zell, who added that lenders “used to care about who they loaned money to.”

To be sure, Zell was reported to be one of roughly two-dozen bidders on the GM Building property, which fetched a then record $1.4 billion from local investor Harry Macklowe. Sour grapes over a lost deal notwithstanding, few market watchers would take issue with Zell’s point about this frothy climate for real estate debt.

“I think the slowdown that Zell is referring to is already being felt,” says Sam Chandan, chief economist at Manhattan-based Reis Inc. “We have over the past few quarters observed a decline in both transaction and pricing gains.”

Like others, Chandan believes that asset prices are currently “at or near” peak levels. He also worries that many lenders are underwriting deals while property prices hover at unsustainable levels. As for the fundamentals that should underpin investor demand, Chandan is less bullish than Zell.

Average effective rent growth in the U.S. office market has accelerated during the past 12 months, but occupancy gains have been slowing. During each of the past two quarters, for example, office vacancy fell by just 20 basis points. Yet the average quarterly decline posted in 2005 and 2006 was 40 basis points, says Chandan.

“I think capital will continue to flow into the U.S. real estate market,” says Chandan. “But certainly not at the same pace [that] it has over the past few years. And the slowdown may already be happening.”