Managers question traditional cycle thinking

Managers are questioning traditional real estate cycle point indicators given the realignment of macroeconomics in a post-GFC world.

Speaking at Institutional Real Estate, Inc.’s 2019 Visions, Insights & Perspectives (VIP) Europe conference on Feb. 20 in Amsterdam, a number of GP representatives have pointed to the rise of supposedly uncorrelated real estate sectors, coupled with persistent low interest rates and inflation, as evidence investors are having to adapt to a “new normal” economic environment.

Andrew Thornton, chief executive officer at Principal Real Estate Europe, said it was dangerous to assume that real estate was in the midst of a normal cycle.

“This cycle is back to front,” said Thornton. “We saw the cap rates compress because of a different interest rate environment, and we’ve now seen economic growth come through, and we’re seeing income growth coming through.

“Things have changed,” he noted, suggesting