Page 44 - Trump University Commercial Real Estate 101

TRUMP UNIVERSITY COMMERCIAL REAL ESTATE 101

The Market Cycle and Land Use

The commercial real estate value cycle can be measured in three ways:
growth, maturity, and decline.

Growth Phase

During this stage, there is an abundance of rural land, usually being
used as farmland. It sits on the outskirts of existing urban areas. As
urban activity picks up, land becomes scarce and expensive.
Development pushes out to the rural areas, where land can be
bought at lower prices. These areas attract urban dwellers who
are priced out of the market. They now can pay less for the land, and
the farmers receive more than they would by keeping it as farmland.
As development continues, local governments show their support
by creating additional infrastructure, such as roads, water and sewer

lines, schools, and police and fire departments. The infrastructure is
expensive, but hey, the market is going like gangbusters. Besides, gov-
ernments fund these improvements from all the tax revenues that the
developments create.

Mature Phase

This occurs when much of the available land in an area is now devel-
oped and growth begins to slow. As the area matures, other sections of
the new fringe become the next growth targets.
Development during the mature phase consists of identifying spare
lots of land called infi ll areas and transforming them into their highest
and best use. Some parcels may become residential, others will be retail
centers to support that new population, and other parts will be zoned
for office buildings or industrial space.

During the mature phase, an opportunity presents itself to revital-
ize some of the original buildings that were built during the early part
of the growth period.

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