cycle surviving the
IREM MEMbERs DIscuss REal EstatE
cyclEs anD How to ManagE tHRougH tHE
DowntuRn by KRIstIn gunDERson Hunt
What goes around comes around:
Real estate is no exception to this rule.
“Real estate is by nature a cyclical investment, seem-
ingly in 8-10 year cycles,” said Larry Baiamonte, CPM®, a
senior investment professional in the real estate equities
division at Nationwide Insurance in Columbus, Ohio.
“Some downturns are minor. Some are major.”
He said while no two downturns are exactly alike,
lessons can be learned from the past to help real estate
managers cope with today’s market and go forward with
ammunition to handle future downturns.
“The benefit of comparing and contrasting is to learn
from history and take the lessons of what worked and
didn’t work and apply them to today’s downturn so we can
make the best of it,” Baiamonte said.
• wHERE wE stanD •
Commercial property values have fallen more than 40
percent since the beginning of 2007, according to the
Congressional Oversight Panel’s February 2010 oversight
report, “Commercial Real Estate Losses and the Risk to
Financial Stability.”
The report highlighted vacancy rates ranging from 8
percent for multifamily housing to 18 percent for office
buildings. Rents for office space have declined by 40 per-
cent and retail space rents have fallen 33 percent.
Further, the report suggested between 2010 and 2014,
refinancing will be necessary for about $1.4 trillion in
commercial real estate loans. Nearly half are already
underwater, meaning the borrower owes more than his or
her property is currently worth.
In late April, at the IREM Leadership and Legislative Summit in Washington, D.C., IREM Members representing a cross-section of
the industry, participated in a discussion comparing the current economic downturn and its impact on real estate with the savings
and loans crisis in the 1980s and 1990s. JPM followed up with several of the group members to take a closer look at the downturns
and where real estate management goes from here.
