Covid Didn’t End The Real Estate Cycle. But A Reckoning Could Be Coming
March 10, 2022 | Mike Phillips and Brian Rogal | Bisnow
Property cycles might be as old as civilization itself, but when they start and when they end is usually a question best answered in hindsight.
In second-century Rome, the empire’s success under emperor Hadrian caused a building boom; when the bubble burst, Roman brick manufacturers and builders simply went bust.
More than 1,300 years later, in Tudor England, the rise of the British Empire led to a dramatic expansion of London, spurring the invention of speculative development and long leases. The Great Fire in 1666 could have brought the boom to the end. Instead, it created an opportunity to rebuild the city.
When the coronavirus pandemic delivered a shock to the world economy two years ago this month, many investors expected it to correct soaring commercial real estate values. But after an initial shaking of the foundation and a period of worried dormancy, conditions returned to something close to normal, with investment eventually flowing again in record volumes.
Global investment activity hit $1.3T in 2021, Real Capital Analytics data shows, a 54% surge over the previous year, largely driven by record-high annual volumes in the Americas and Asia-Pacific. Despite being mere months removed from the pandemic preventing people from using huge swaths of commercial real estate, the sector had an all-time record year.
It’s a surprising situation. The potential black swan event spoken of for years, one that would herald the end of the good times, arrived with the spread of Covid-19. But other than accelerating trends already apparent in sectors like retail and industrial, not much changed.
