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The Commercial Real Estate (CRE) bubble went on from 2002 to 2006 and price declines lagged for nearly two years, but now bust is finally here. Our analysis follows the Bloomberg video below.
The video is from September 2007. One of the challenges of timing bubble tops is that they always go on longer than novice bubble observers expect. iTulip after tracking asset price inflations since 1998 has determined that a multi-year decline in CRE has finally begun.
Time at last to short commercial real estate ($subscription)
by Eric Janszen (June 17, 2008, iTulip)
A combination of macro economic and credit market factors have finally made commercial real estate (CRE) ripe for a multi-year decline. It’s been a long time coming.
We are in the early innings of a CRE bubble correction that will be compounded by recession. Vacancy rates will rise, cap rates will rise, prices will fall. The time is ripe because sellers are still hanging on in typical post-bubble fashion, refusing to acknowledge that buying commercial properties at a 2.5% cap rate when the historical average is 9% was driven by speculative fervor, that prices are still too high and are falling, and that the game of pass the CRE hot potato among PE firms using securitized debt or commercial bank lending to finance the transactions is over. More ($ Subscription) …
The video is from September 2007. One of the challenges of timing bubble tops is that they always go on longer than novice bubble observers expect. iTulip after tracking asset price inflations since 1998 has determined that a multi-year decline in CRE has finally begun.
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by Eric Janszen (June 17, 2008, iTulip)
A combination of macro economic and credit market factors have finally made commercial real estate (CRE) ripe for a multi-year decline. It’s been a long time coming.
We are in the early innings of a CRE bubble correction that will be compounded by recession. Vacancy rates will rise, cap rates will rise, prices will fall. The time is ripe because sellers are still hanging on in typical post-bubble fashion, refusing to acknowledge that buying commercial properties at a 2.5% cap rate when the historical average is 9% was driven by speculative fervor, that prices are still too high and are falling, and that the game of pass the CRE hot potato among PE firms using securitized debt or commercial bank lending to finance the transactions is over. More ($ Subscription) …