Exit and storm strategies become apparent and visible
April 11, 2013 - Appraisal & Consulting
Cycles in the economy, capital and property markets are inevitable. The timing and shape and patterns are often inscrutable and evade the forecasters. The Fed has repeatedly used 2015 as the earliest exit of easy money, even with target guidelines of 6.5% unemployment and 2% inflation. Timing for new construction inside 2015 is tight even if the project is out of the ground. For Boston and several top tier markets, additions to supply will probably be delivered through 2016 and probably beyond. A ten-year cycle would push into 2018 with some serious adjusting in 2017. Of course the gradual rate of recovery and increasingly globalized economy can make any historical cyclicality obsolete - or can it?
Reconciling the capital and property markets with economic cycles is a challenge. However, certain logical relationships do normally prevail. If the three's can be sustained through 2015, exit and storm strategies are upon us. For commercial real estate institutional investors that have stretched the holding period, the exit might well be a storm strategy. Preparedness and liquidity are as important as sell strategies. The capital markets will certainly be impacted by the probable bump in 2015 and commercial property markets will probably reverberate. These tumblers are designed to be fitted in the same interactive casing. As these parts turn, recording measures over time, these exit and storm strategies will become more apparent and visible. The time is upon us to start tuning up for the next cycle!
David Kirk, CRE, MAI., FRICS, is principal and founder of Kirk & Company, Real Estate Counselors, Boston.