Commercial real estate cycles are influenced by market fundamentals precipitated by the stability of the financial markets, the actual and perceived robustness of the economy, buoyancy of property classes within the sector, etc; this underscores the factors which are instrumental in determining the performance of asset class. However, the viability of individual properties are primarily local market driven influenced by the forces in the microeconomic environment inclusive of supply and demand, zoning ordinances, building codes, entrance or exit of industries, population shifts, etc. However, macroeconomic forces e.g. a war, recession, instability in foreign economic markets, subprime market collapse, etc are influential in determining the stability and resilience of local markets as their effects filter down to the local level.

Fundamental and supplementary factors are:-

Demand for space- is characteristic of tenants’ sentiment in relationship to the performance of their businesses. The level of optimism associated with tenants operating a growing, stabilized or shrinking business drives the demand for expansion, maintaining current occupancy rate or contraction of needed space. The demand for commercial space is a derivative of where the business is in its life cycle and senior management’s governance of a space management system tied to business performance.

Housing Supply – is influenced by macro and microeconomic factors which effectuate the performance of the economic environment, business environment, demand for housing, etc. Consequently, if conditions warrant an increase in construction to satisfy the demand for additional realty to be put online, it will occur in response to the market. Being there is a time delay in the developmental process from concept through project completion an oversupply sometimes results as multiple developers over saturate the market with their respective parcels of real property. This leads to supply exceeding demand and the equation shifting with an imbalance of excess supply in relationship to demand.

Population Characteristics- influence real estate cycles through demographic makeup which are determinants of family structures, disposable income, desired housing, community amenities, etc. Population shifts can affect where are the hot spots for real estate acquisitions and developments and the market prices.

Social Attitudes- determine if markets are pro real estate or anti real estate from a developmental standpoint. Some communities desirous of maintaining their autonomy and historic identity are resistant to the construction of new real estate and even industry, e.g. Home Depot. Conversely, there are communities that embrace progress and create an environment with incentives to attract new development with its resultant taxes for the community.

Tax Issues- the tax laws in place can be instrumental in creating favorable or unfavorable realty estate environments. Tax credits and incentives are attractive to developers if other market factors are supportive of project feasibility.

Business Activities- the performance of the business sector is impactful on the robustness of real property markets and affects realty cycles. The unemployment rate and the general confidence people have in the stability of their industry, employers and the economy determine their propensity to invest in businesses, housing, investment real estate and their ability to quality for funding to secure these purchases and/or the willingness to risk capital.

Supply of Money for Financing- the abundance of available money, interest rates, terms, etc can help to expand or contract the real estate market. Developers, investors, homeowners maybe in the market to develop or buy real estate; the money supply has to be adequate with rates and terms that allow an acceptable return on investment to compensate for the inherent risk associated with all real estate investments.

CRE cycles have factors which occur sequentially and/or simultaneously during the period. Different markets are impacted to various degrees by the factors and their ability to rebound also varies. From an investment perspective, when the market is down and real estate can be acquired at a discount and held until the market recovers, appreciation in value can be captured and/or extracted from the property when the commercial real estate cycle is in an upward trajectory in terms of market value.

When a market is as volatile as the current real estate market, some real estate agent will do whatever is necessary to close that deal. Unfortunately, black hat mortgage closings are on the rise and for the real estate agent this can mean less and less people investing their time and money with the real estate agent.

When the subprime mortgage market imploded, the world of real estate began to flounder. Agents who were once bringing in the closings hand over fist were now left to live on their savings between sales. Black hat mortgage approvals began to rise and some of these mortgage closings, based on improper information and plain, old fashioned lies were linked to real estate agents.

In our world of gossip, it did not take long for the word to spread that real estate agents were using unlawful techniques to close mortgage sales and the potential home buyer, not wanting to get caught up in a legal battle over the purchase of a home began searching for their homes and the best mortgage options on their own.

The real estate agent makes money from the closing of the home sale and when the home buyer is not using their services they simply are not making money. How does the real estate agent earn back the buyers trust? By using lawful techniques all the time and verbally acknowledging the improper techniques used by some other real estate agents.

When a real estate agent walks into a home deal telling the home owner they will use only the proper lines of approval, there is a trust that is gained between the real estate agent and the home buyer. This trust will be passed on to other home buyers and thus the rebuilding process will begin.

In a world of real estate foreclosures and homes being taken back by backs and lenders, the home buyers who are preapproved will have their choice of homes. These home buyers are the saving grace of the real estate agent but capturing that buyers trust can often be harder than selling that next home.