I have started to hear the phrase "we live in a relative world" or similar sentiments much more recently. A "relative world" is shorthand for thinking about real estate as an asset class that competes for capital against other invest-able assets. It's an argument for pricing real estate in comparison to other assets and not on an absolute basis.
The most common point of comparison is Baa bond yield. The Baa rating is used as a proxy for the credit of a typical commercial real estate tenant
Two issues to note:
1) Spreads can close from either side. A large spread to Baa rates doesn't imply further cap rate compression any more than it indicates overpricing of bonds or overpricing of both bonds and real estate vs. equities.
2) The competition for capital goes beyond fixed income investments. Of course, most commentators acknowledge this, but when you hear "we live in a relative world" it's almost always followed by a discussion of the 10-year treasury and Baa rates. Equities matter. As an example, Green Street advisers finds real estate underpriced vs fixed income alternatives and overpriced vs. stocks.