Expansion phase

Expansion phase

During the expansion phase, we’re going to continue to see occupancy begin to exceed the long-term average. And as vacancies drop, property owners will raise rents for both commercial and residential real estate.

We’re starting to see double-digit rental growth in some markets right now.

And since most real estate expenses are fixed, every dollar increase in rental revenue is going to mostly go towards profits and with increased profits and real estate, that’s going to attract more builders, more developers, and investors who will want a piece of this growing profit pie.

But in real estate, everything takes time.

Building a new home or office or apartment takes time to build and bring to the market.

And deals have to be negotiated.

Studies need to be conducted.

The land has to be created.

Permits need to be applied for and obtained.

Financing needs to be secured.

All of these things are not easy as banks are still very cautious right now during these periods. So it takes time.

By the time a meaningful amount of new inventory of houses comes to the market and becomes available, the overall economic expansion will have been well on its way for a good five to seven years. So what that means is during that time, demand has been able to far outpace supply and we’re starting to see that now, which is going to lead to even higher occupancies and more and more increases in rents.