Are We On The Top?

Are we on the top of this cycle? I suppose if we really knew these type things, we wouldn’t tell anyone. We would do whatever it was to take advantage of it! All prognosticators usually try to use historical data and “the way it was last time” to prove up their current theory. Read more after the two graphs about these trends.

I have attached a couple graphs showing the past ten years of office sales over 100,000 SF in the U.S. I thought it was interesting that the average NRA stays in a band of around 100,000 SF and the average price stayed in a band of $30 million.

Charts1

This set of stats in this graph really shows how good of a job we do with the cap rates. We see the cap rates are forward looking against the occupancy rates. The rates widen as investors see the occupancy getting weaker and compress as they see properties getting full.

Charts2

I have spoken to around 50 national leaders in different areas of our CRE business and I keep hearing the same thing.

When I ask them what broad national trends they are seeing is this, “We aren’t really seeing any trends right now”. What I have noticed over the years if you can’t see trends you are either at the top of the curve or the bottom. We know we aren’t on the bottom!

So if that is the case, how long will we stay on the top of the curve or is the curve really a curve this time? Some will say that we have a new paradigm and the top of the curve isn’t really a curve but possibly a flat spot on the way to a higher plateau.

So they argue that we don’t have a simple curve anymore that goes up, tops out, goes down, bottoms out and starts over again but a very complex curve that starts up, flattens out, maybe dips a bit and starts a new upward trend.

Well, I suppose, depending if you are selling or buying currently, you may adopt one or the other. All I see is that everyone who is looking for a trend isn’t seeing any. Also it looks like under both scenarios we may be seeing the beginning of the down cycle on the simple curve or the beginning of the dip on the complex curve. So, is it time to buy, or a time to sell, or sit tight?

Good luck!