Page 37 - Trump University Commercial Real Estate 101

Ho w to Read a Market

1. Buyers ’ Market, Phase I
2. Buyers ’ Market, Phase II
3. Sellers ’ Market, Phase I
4. Sellers ’ Market, Phase II

Every type of commercial property follows these four phases, though
they may be in different parts of the cycle at any given time. For
instance, apartment investments will experience strength before retail
does. That ’ s because renters can move into apartments very quickly
after, say, a new factory opens in town. Retail establishments will fi rst
notice the stronger consumer demand and then build to take advan-
tage of it. It ’ s simply cause and effect .
How long does it take for a market to complete a full rotation? It
depends on the dynamics of that market. The average market cycle
lasts between 10 and 25 years. Cities on the East Coast and West Coast
tend to change more quickly from phase to phase than do cities in the
heartland of America.
In fact, coastal cities tend to have meteoric rises and stonelike
falls. In the long periods of time between sudden rises and abrupt falls,
investors tend to experience slow, steady growth, and sometimes stag-
nation, for quite some time.

Buyers ’ Market, Phase I

Each phase in the market exhibits unique characteristics that you can
identify if you ’ re watching for them. In a Buyers ’ Market, Phase I, you
will find a market that ’ s oversupplied with commercial properties.

Supply is one of the key market forces that causes a market to go from
boom to bust and back again.
At all downturns of a market, oversupply will be present. Think of
a real estate market as if it were the largest aircraft carrier on the ocean.
The captain can decide within an instant to change direction, but the

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