Cycology – what has been learnt from previous real estate cycles?
| DOI | https://doi.org/10.1108/JPIF-04-2017-0028 |
| Date | 03 July 2017 |
| Pages | 427-435 |
| Published date | 03 July 2017 |
| Author | Simon Durkin |
| Subject Matter | Property management & built environment,Real estate & property,Property valuation & finance |
Cycology –what has been learnt
from previous real estate cycles?
Simon Durkin
BNP Paribas Real Estate, London, UK
Abstract
Purpose –The purpose of this paper is to look at the lessons learnt from the previous real estate cycles based
on a sample of investors, occupiers and academics and seek to understand the practical challenges the
industry faces in the current cycle.
Design/methodology/approach –The paper summarises the results of qualitative research and
interviews conducted and analysed by BNP Paribas Real Estate and Ipsos MORI.
Findings –The paper considers the crisis of 2008, its impact on performance, lessons learnt by the industry
as a result and the future challenges. Whilst the industry felt well prepared to withstand future uncertainty
and change, there was concern that subsequent generations of industry professionals will not be well
equipped to deal with the pace and magnitude of change.
Practical implications –This is a practical study that seeks to place a greater emphasis on the drivers of
market sentiment rather than focussing on quantitative forecasts.
Originality/value –There is much attention given to quantitative property market forecasts; however, there
seems to be little appreciation of the need to evolve our process in today’s fast paced, structurally changing
market which will behave differently to how it has in the past. Economic forecasts have received much
criticism recently and these provide the basis for property market forecasts. The consideration of sentiment
and the qualitative aspect of the future drivers of performance have never been so critical.
Keywords Future, Sentiment, Cycles, BNP Paribas Real Estate, MSCI, Real estate forecasting
Paper type Research paper
Introduction
Much like the economic forecasts on which we rely, the research community reacted slowly
to the emerging financial crisis of 2008 and continues to be challenged in understanding the
impact on our asset class of fast paced and multi-faceted change. Furthermore, the
information on which we rely (MSCI) is becoming less representative of the entire
marketplace and consequently increases the challenges of understanding future real estate
performance in a global interconnected world.
Change is being driven by a combination of technology, globalisation, demographics and
regulation, as well as an increasing focus on the environmental impact of real estate, all in
the context of a constantly fluctuating political backdrop.
It is recognition of the need to evolve that has led BNP Paribas Real Estate to partner
with Ipsos MORI to launch Cycology, a study that acknowledges the pace of change and the
challenges it creates as we seek to understand the future for our asset class. Cycology
highlights the themes and drivers that investors and occupiers believe have been learnt
from the previous cycle and what will shape future cycles.
Cycles of the past
The ancient Greek Philosopher Heraclitus was talking about change in 500BC, so whilst we
may feel that marketchange is a recent phenomenon, it is not. Whilstcycles have always been
driven by different factors, arguably today the pace and extent of change is unprecedented:
No man ever steps in the same river twice, for it’s not the same river and he is not the same man
(Heraclitus, Greek Philosopher, born 535BC).
Recent events, such as the UK’s decision to leave the European Union and the surprise
election of President Trump, represent scenarios that once seemed unlikely, but they became
Journal of Property Investment &
Finance
Vol. 35 No. 4, 2017
pp. 427-435
© Emerald PublishingLimited
1463-578X
DOI 10.1108/JPIF-04-2017-0028
Received 5 April 2017
Accepted 13 April 2017
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1463-578X.htm
427
Real estate
cycles
To continue reading
Request your trial