Recession phase

Recession phase

The next phase, the recession phase, will come fast here. The transition from the hyper supply, the boom cycle to the recession occurs when occupancy rates fall below the long-term average.

Occupancy rate= 100%- The vacancy rate

 

The glut of a new supply finally overpowers the market, driving rents and property prices down and vacancies start to climb up. And new construction stops and a few new projects are going to start, but the many projects that started in the hyper supply phase are still going to continue to be delivered, the continued additions of inventory leased to lower occupancy and lower rents, which reduces revenue for the property owners.