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Matrix Research Bulletins
There are few things more certain than the cyclicality of the industry. Many of today’s leaders cut their teeth by finding profit in the S&L crisis in the early 1990s. So ingrained are cycles that a common way of denoting time is to reference the series of busts that follow the booms - the Russian bond crisis, 9/11, the global financial crisis, etc.
There are multiple indexes that measure the performance of public and private commercial real estate, property types, different geographies and investor strategy. Examples include the NCREIF Property Index, which is the standard for assessing “core” real estate assets, or RCA’s Commercial Property Price Index, which measures property values.
With nearly 600,000 units under construction, U.S. multifamily apartment deliveries were expected to reach a cycle peak of 360,000 in 2017. However, through three quarters new supply is running only slightly ahead of last year’s 281,000 deliveries, and construction times from start to finish are taking much longer than historical norms.
As leaves fall to the ground and the end of another year is in sight, it appears that the economy and the real estate market have steadied. Property values seem to be high and a bit stagnant, and real estate fundamentals are solid if unspectacular. New supply, which has slowed throughout the year and will come in slightly above 2016 levels, has led to decelerating but stabilizing multifamily rent growth.
Economists largely agree that the U.S. economy will continue the moderate growth path it has traveled the last several years. But the consensus among prognosticators obscures a dilemma: The economy is behaving in ways it hasn’t in the past and nobody is entirely sure as to why. Among the issues vexing economists include why—when employment gains are so healthy—workforce participation remains low, while GDP growth and inflation remain subdued.