How to Tell When Real Estate Markets Are Overheating
Count the cranes.
In commercial real estate, when development of skyscrapers is booming, that’s usually the beginning of the end for that particular market boom.
Most development funding is approved when times are good. Of course, it takes a long time to build. By the time all the projects are completed, the market typically softens. Not a great time to deliver new supply.
This new glut of vacant space causes landlords to slash rents to compete for occupancy. So begins the inevitable commercial real estate down-cycle.
Then – when all the cranes have gone back into hibernation – is precisely the time to go shopping for office, warehouse and retail properties.