Real Estate values move in a continuing economic cycle. Understanding the general principles of the economic cycle is key to successful real estate investing. Within the same market place Office, Retail, Multi-Family and Industrial properties may be at different phases in the the commercial real estate cycle.
A closer examination of an individual Real Estate Cycle shows that each cycle has definite phases and there are stages within each phase
Recovery Phase
- Decreasing Vacancy Rates
- Low New Construction
- Moderate Space Absorption
- Low to Moderate Employment Growth
- Negligible to Low Rate Rental Growth
Expansion Phase:
- Decreasing Vacancy Rates
- Moderate/High New Construction
- High Absorption
- Moderate/HighEmployment Growth
- Med/High Rate of Rental Growth
Over Supply Phase:
- Increasing Vacancy Rates
- Moderate/High New Construction
- Low to Negative Absorption
- Moderate to Low Low Employment Growth
- Medium to Low Rate of Rental Growth
Recession Phase:
- Increasing Vacancy Rates
- Moderate to Low New Construction
- Low Absorption Rate of Space
- Low to Negative Employment Growth
- Low to Negative Rate of Rental Growth
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