I’ve written before about the economic cycle, led by wages, then consumer spending, capital spending, manufacturing, and finally unemployment.
Office buildings and commercial buildings, industrial parks, are in the capital spending and manufacturing parts of the cycle, and thus lag the consumer spending cycle by 3-9 months.
This is because current construction was entered into by late spring, when retail was still hot. I am sure, although I don’t have data on this yet, that anybody who had planned to expand their furniture factory, build a bigger mortgage office building, develop a new strip mall, or expand their car dealership, will not do so from this point on. By mid 2000, REITs will be down, as the vacancy rate will increase in the business sector.
Whenever a question arises about a sector, think about the economic cycle, and the lags between them.
Also remember that by the time a recession is identified, the worst damage is behind us. That’s how you become ahead of the curve (as Joseph Ellis’ book is titled).