Real Estate Cycle Tailwinds Driving U.S. Commercial and Multifamily Sectors

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Based on the Mortgage Bankers Association (MBA) recently released Commercial Real Estate/Multifamily Finance Quarterly Data Book for the first quarter of 2011. First quarter data on the commercial real estate markets show the natural effects of the turn of the real estate cycle.

Broader economic indicators were positive in the first quarter, but provided less of a tail wind to commercial real estate markets than they might have. Despite this softness, real estate fundamentals have stabilized and are beginning to show signs of mending. Transaction volumes are picking up, and pricing and loan performance are showing initial signs - inconsistent though they are - of improvement. Any pick-up in economic growth will speed the healing; any slowdown will draw out the cycle.

For most property types, vacancy rates remain elevated, transaction volumes remain muted and property prices remain below their peaks, but the natural ebb and flow of the real estate cycle is beginning to have an effect.

Economic growth, coupled with a constriction in new supply in the wake of a real estate downturn, is helping to stabilize and mend the commercial real estate markets. The pace and shape of continued recovery will be driven by the rate of economic growth and by how investors and developers react to the market changes they see and foresee.

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