Market Cycles & Risk Management

Real estate markets move through predictable cycles with four phases: recovery (declining vacancy, flat rents, no new construction), expansion (falling vacancy, rising rents, new construction begins), hypersupply (vacancy bottoms then rises as new supply outpaces demand), and recession (rising vacancy, declining rents, construction halts). Each cycle typically lasts 7-10 years, though timing varies by market and property type. The challenge is that cycles are easier to identify in hindsight than in real time. Most investors buy at the wrong time — during expansion when prices are high and everyone is optimistic — and sell during recession when prices are low and fear dominates. Understanding cycles helps investors make counter-cyclical decisions.