Authors: Glenn R. Mueller

Start Page:115
End Page:126
Volume: 8
Issue Number: 2
Year: 2002
Publication: Journal of Real Estate Portfolio Management

Abstract: Commercial real estate markets recovered and hit a strong growth phase in the late 1990s providing investor’s with strong income and appreciation growth. Following peak occupancy levels in 2000 and a decline in 2001 and the first half of 2002, many investors wonder what the new millennium will bring for the next real estate cycle. This research looks at the historic
‘‘physical’’ and ‘‘financial’’ real estate cycle of office markets and projects the potential future movements of both. The findings indicate that physical (demand/supply) cycles should be longer and less volatile than previous cycles, providing investors with moderate, but more stable, income returns than cycles of the last three decades. On the other hand, financial cycles (which affect prices) may be shorter and have more short-term volatility, due to real estate’s new access to the public capital markets in the 1990s. The growth of the public real estate capital markets may also bring more discipline to the industry and help stabilize future physical cycles.