5 Stages of the Market Cycle

Since 2008, the US economy has worked its way through the five stages of the market cycle and as we believe is at the peak of the market. The good news is the commercial real estate market continues to perform and interest rates are still historically low. This is a great time for commercial real estate owners and landlords to strike their best deals. For more information regarding property evaluations and market analysis please contact us for a free consultation.

Early Recession

  • Job layoffs create negative space absorption
  • Stated rent unchanged
  • Landlords get aggressive with rent concessions
  • Property values difficult to determine
  • Lack of transactions because of wide bid/ask spread
  • New supply delivered that started pre-recession.

Job growth went negative in Feb 2008 CRE prices peak in Aug 2008

Late Recession

  • Continued layoffs create more vacancy
  • CMBS delinquencies increase substantially
  • Bank foreclosure actions begin
  • Asking rents fall – “go ugly early”
  • Property values difficult to determine Lack of transactions because of wide bid/ask spread
  • Lack of transactions as owners and lenders won’t recognize losses.

Layoffs peak at 802,000 in Mar 2009 CRE prices bottom in Mar 2010

A New Dawn Breaking

  • Layoffs subside as businesses have right-sized CMBS delinquencies increase substantially
  • Bank foreclosure actions begin
  • Asking rents continue to fall
  • Price discovery starts to happen again Some deals happen as sellers write down assets
  • Prices close to the bottom
  • Private-equity opportunity funds raise capital
  • Development pipeline is quiet and empty

Job growth turned positive Jan 2011

Early Recovery

  • New job growth starts to fill vacant space CMBS delinquencies finally begin to decline
  • Bank foreclosure actions continue
  • Asking rents stop falling
  • Prices increase from bottom lows
  • Private-equity funds raise even more capital
  • Other investors resume investments
  • Transaction volume is increasing
  • Development pipeline is quiet and empty

CRE prices double between March 2010 and April 2016

Late Stage Recovery

  • New job growth continues to fill vacant space
  • Asking rents increase
  • Prices increase at rapid rate
  • Investor interest is at a peak
  • Transaction volume at highest levels
  • Development pipeline reopens

CRE prices double between March 2010 and April 2016

At the Peak of the Market

  • New job growth continues to fill vacant space
  • Asking rents increase
  • Property value appreciation rate slows down
  • Transaction volume declines
  • Tepid investor appetite due to low yields
  • Development pipeline wide open
  • REITs stop buying and start developing

Strong job growth continues in 2018 CRE prices peaking in major markets

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