The average commercial real estate cycle has been known to last between six and seven years before rapid expansion, peaking valuations and overbuilding forces the industry into a nationwide recession. But this cycle has defied those odds.
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Commercial real estate has been experiencing a record run of rising valuations for about eight years, and many experts believe the industry still has room to grow. Commercial pricing has been appreciating since the Great Recession, with the Real Capital Analytics all-property index showing prices have jumped 104% since 2010.
CBRE CEO Robert Sulentic told the Los Angeles Times that the strength of this cycle reflects growing organization and strategic planning in the industry.
"Historically, several years into an economic expansion there is overbuilding. Now the market is more organized," Sulentic said. "This is unlike any cycle I have seen in my 33-year career."
The 60-year-old executive of the Fortune 500, Los Angeles-based brokerage said the industry is being managed more transparently. A lack of easy-flowing capital, due to banks tightening their lending standards, has forced developers to become smarter and more conservative in their deals, making a real estate crash less likely.
"We expect the economy will sustain slow growth into next year," Sulentic told the Times. "If it's slow growth, there won't be a lot of overbuilding."
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