CMBS spreads are wider, issuance is far less than the heyday, and banks are under pressure from the regulators to reduce LTV. It is becoming harder to max out the leverage and more equity is required. Tie this to a slowing economy again, all sorts of increasing troubles around the world, and another year of Obama, and a growing terror risk, and there is no reason to believe CRE values will be increasing over this year. While many say fundamentals are still good, the reality is it now takes more equity, rates are higher, and the economy is slowing, so values have to decrease in that scenario. A buyer of your asset is no longer able to stretch to acquire what you own.

If the Asians really are pulling back as we have been told by them, then the support for the market starts to go away. Were it not for the Chinese, CRE values would never have reached where they are. The funny money deals are ending. The Fed may or may not keep raising rates, but the prospect they could do three more raises by year end is enough to cause investors to adjust their proformas to reflect that possibility. That means lower prices.

The December and Q4 GDP and capital Expenditure numbers are poor for this stage of the cycle. They indicate the economy is slowing again, and Q1 of 2016 is surely not encouraging. The steep downturn in the stock market and junk bond market do not bode well for investor confidence. Add to that the trashing of the current economy you will hear until the election, and the psychology of consumers and boards is not going to be improving.

We have hit the top and it is time to sit on the side. I am certain many will say all is sound and new build is limited so no need to worry. That is what they always say until they realize it is too late.