State of the cycle: Assessing where real estate investments stand
The years following the Great Recession were excellent vintage years for US real estate investing. Managers that were well capitalised to take advantage of those opportunities have made great returns for their investors. Now things become more difficult. Market timing is not a sustainable strategy, but neither is ignoring the cyclic supply and demand fundamentals of the real estate markets. While it may feel premature to consider whether we are nearing an economic downturn before the US economy has experienced a palpable recovery, this question is on our minds. We also question whether we are nearing an inflection point in the commercial real estate cycle.
Where are we in the cycle?
Economically speaking, the game has not even started. Economic growth has hardly reached “escape velocity” (referring to the view held by many market participants that the US economy has the potential to — with the proper monetary policy interventions — return to pre-crisis GDP grow