Overall, CRE is in a settling out period, and if we are lucky it will just flat line, although some decline in values will occur in some product types and locations, as the economy continues to just muddle through. We are not crashing or anything like that, but the top is here and being a seller now is likely the right place to be.

While the capital markets and oil seem to have found a temporary base, the world situation and the US election continue to be as uncertain and disruptive as ever. The election has turned into a bizarre circus with a bribe taking criminal on one side and a sleazy bully on the other as the front runners. This is being noted offshore and it is not engendering happy thoughts in the minds of major real estate investors. It is hard to say what impact the election of either of these terrible people would have, but it is not helpful to the investment climate. If we are lucky Trump will not get the nomination and someone else will be president. The threat of a major terror incident grows by the day and the likelihood a attacks in Europe are very high. So long as Obama is in office ISIS will continue to rampage and the Russians will gain further control of the Mideast. Iran now has an extra $100 billion to spend on arms and promoting terror, so the threat of a really bad event in the region is greater than ever. The Obama Clinton legacy of disastrous foreign policy will be with us for a decade.

The flip side is there is nowhere for capital to run other than the US right now. Compared to Europe, our financial system is far more sound and our economy is more stable and doing much better. The European banking system remains a weak and unstable problem. They still have not dealt with all the bad loans and errors of the crash. Management is possibly getting more competent, but we will have to wait to see. Were it not for Draghi, things would be far worse. Europe has years to go before it makes a real recovery, and all of that could be upended by Russia and terror incidents.

The US debt markets for CRE have become much more problematic with the regulators clamping down on bank lending to CRE and with the CMBS market in more turmoil and a continuing overhang of maturities yet to be completed. Spreads have widened and leverage will be less, making the continued rise in prices for assets harder to achieve. Equity investors have become more cautious, and are sitting on capital that just a year ago would have jumped into CRE deals. The result is pricing is moderating and for hotels, prices can be expected to begin to decline as NOI in that business declines this year. Occupancy is already down 3% in January and Revpar is barely increasing. This at the same time a lot of new rooms are coming on the market and Airbnb is beginning to take market share in several markets and is growing rapidly.

Multi is cooling as much more product hits the market and as new single family home sales grow. Retailers had a weak Christmas and are now closing hundreds of stares. It is highly unlikely that nay major new retail will be built for a long time. With so many major department and Wal Mart stores closing now, there will be markets where retail is not the favored product. That is a business which is in transition to online and in turmoil, and is not likely to see any good news for a very long time. As corporate profits continue weak, it is unlikely that there will be much increase in office demand. With the coming meltdown of venture tech deals now beginning, that demand will dry up quickly. Valuations for you ng tech companies is dropping now, and new capital for new ventures is slowing and spending on new space will be slowing or stopping.

Overall, CRE is in a settling out period, and if we are lucky it will just flat line, although some decline in values will occur in some product types and locations, as the economy continues to just muddle through. We are not crashing or anything like that, but the top is here and being a seller now is likely the right place to be.