Global ultra-wealthy population to rise 22% in 5 years, they invest in CRE
[{"id": "ej27lhj", "text": "Now I guess the question is in the next year or so when the current cycle busts how will that affect them and their appetite for commercial real estate.", "replies": [{"id": "ej2on7s", "text": "Do you forsee a bust like we did 10 years ago?\n\nI think that if anything we will just experience a level of stagnation as interest rates rise. The main reason that real estate was hit so hard the last recession is that it was caused by a single family housing and lending crisis. The economy is constantly expanding and contracting with the credit cycle but I don\u2019t see it being as bad for real estate this time around. \n\nWhat are your thoughts?", "replies": [{"id": "ej2wdol", "text": "If you want to know when the bus is going to happen keep an eye on the percent of investor money that Banks require before they make a loan on a building. Once that number gets down to zero there is going to be a bust soon. At that point there's no reason for investors to be hesitant to make risky investments because they don't have any skin in the game. You'll see tremendous over building at that point that are market generally can't support. Soon enough they won't be able to pay their loans and that's usually when the bust happens. \n\nI've been in commercial real estate for 25 years and work with numerous real estate economists. It's about as predictable of a cycle as you can get. Whenever there's a recession commercial real estate always takes a huge hit. The good thing is is that it's what keeps rents down long-term. People over build and there's far more product on the market then there are tenants and as a result they have to lower rental rates to entice clients to older buildings.", "replies": [{"id": "ej33i2z", "text": "When do you see the cycle reaching its peak, if it already hasn\u2019t. \n\nLending is already tightening up as the fed raises rates so that naturally lowers yields and prices as commercial loans are typically sized by DSCR constraint as well as LTV. \n\nI live in coastal Southern California so I guess I have never seen that part of the cycle as we have a chronic housing shortage even when a lot of supply is being added to the market. Building is challenging due to the govt and most everything is already at its highest and best use because there is no empty land and the cost of acquiring brownfield is too expensive to make redevelopment feasible. ", "replies": [], "depth": 4}, {"id": "ej38qbs", "text": "Well said.  The signal is when leverage becomes ridiculous.  CMBS in 2006 comes to mind, and that was the end of that run.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}]