Multifamily market cycles; what are they and why are they important?

Similar to the broader economy, commercial real estate is a cyclical market. We’re always monitoring key market indicators via multiple industry news outlets and research resources. Please refer to our Research Page for some great resources.  

There are four phases to the real estate cycle, namely:

  1. Recovery

  2. Expansion

  3. Hyper Supply

  4. Recession


These four phases move in a continuous wave pattern with the end of the recession phase connecting to the beginning of the recovery phase. The sequence always remains the same, although the time spent in each phase varies market to market. It may take 8-12 years to complete the full cycle, commonly with 3-5 years in each phase.

Knowing where in the cycle a market sits, drives very strategic decisions for us as far as underwriting/valuation, ownership business planning, and exit strategy.  

Below is an industry accepted list of market cycle phase indicators, 


  • Decreasing Vacancy Rates

  • Cap rates trending down

  • Low New Construction

  • Moderate Absorption

  • Low/Moderate Employment Growth

  • Neg/Low Rental Rate Growth

Expansion, a.k.a Seller's Market or Emerging Market

  • Decreasing Vacancy Rates

  • Lowest Cap rates

  • Moderate/High New Construction

  • High Absorption

  • Moderate/High Employment Growth

  • Med/High Rental Rate Growth

Hyper supply

  • Increasing Vacancy Rates

  • Cap rates trending up

  • Moderate/High New Construction

  • Low/Negative Absorption

  • Moderate/Low Employment Growth

  • Med/Low Rental Rate Growth

Recession, a.k.a Buyer's Market

  • Increasing Vacancy Rates

  • Moderate/Low New Construction

  • Highest Cap rates

  • Low Absorption

  • Low/Negative Employment Growth

  • Low/Neg Rental Rate Growth