Page 43 - Trump University Commercial Real Estate 101

Ho w to Read a Market

You can spot the very beginning of this phase because properties
and space begin to stay on the market longer. Gone are the days when
multiple offers are presented to properties the instant they hit the mar-

ket. Office and retail space is getting filled up, but not snatched up.
Sellers and lessors (who have space to lease) are still getting infl ated
prices, but they ’ re waiting longer for buyers and lessees (who need
space) to act. Land is still being purchased for speculation. The amount
of construction in the pipeline begins to look excessive.
For the first time since the Buyers ’ Market, Phase II stage began,

business and job growth begin to slow.
As investors sniff that the market is changing, they again conclude
that now is the peak, and it ’ s time to sell those properties. Suddenly there
is much more space on the market, exceeding what can be absorbed.
The overcorrection continues and even more properties come on
the market. As it takes longer to move them, sellers lower their prices.
Building owners who are feeling the effects of an offi ce - space glut
begin to slash lease rates.
You know what happens from here — history repeats itself. The
downward spiral picks up speed as each owner and seller reaches his
personal panic threshold and caves in to get the deal done.
Smart investors have long since pulled their money out of this
market and have already bought into another emerging market. They
did this as soon as their leading indicators hinted that the market was
transitioning into a Sellers ’ Market, Phase II.
Remember the two main market forces that will tip you off to this

transition: The first is job growth. When it becomes stagnant, that
means there are no more people moving into the area. Demand for
properties is about to fall. Unless an area can create more jobs, it will
begin an inevitable downward phase.
The second main market force to watch constantly is supply. In
every emerging market, a key factor causing that market to lose its
momentum is overbuilding and oversupply. When builders build more
than demand warrants, they ’ re forced to lower their prices and sell
inventory to pay the bank notes that are marching due.

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