The Real Estate Cycle Revealed

Although you now know there are more kinds of commercial property than you could have imagined, you may still be surprised to learn that their performance over time is cyclical in whole and in part. What I mean by that is that each asset class runs through a cycle. And each asset class's cycle either flows before, flows with, or flows after another asset class's cycle.

For example, you'll find that growth in residential housing will fuel a similar but slightly lagging rise in retail. This pattern makes sense when you consider that new homeowners will want shopping centers, grocery stores, and other conveniences near where they live. The surge in retail then drives growth in the industrial and distribution sectors, so that means warehouse and mixed-use property development grows. Home development also drives some growth in commercial office space, but again commercial lags behind. That's why when housing development slows, it takes a few years for commercial to slow down, too. You've probably noticed that. When the news is reporting real estate declines, new commercial projects are still getting underway. Now you know why.

Real estate is about cycles and the inevitability of them. Once you know that and know how to pay attention to the cycles, you'll know the lay of the land in this regard, too, and you'll be in a position to make the best of the cycle by making the best decisions along the way.

Was this article helpful?

0 0

Post a comment