Glenn Mueller, University of Denver

Where Are We in the Real Estate Cycle?

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Guest: Glenn Mueller, University of Denver

 
When it comes to understanding real estate cycles, few voices carry as much weight as Prof. Glenn Mueller, of Denver University. With over 40 years in the real estate industry and more than three decades of publishing the Market Cycle Monitor – used by institutional investors, developers, and academics alike – his data-driven framework is one of the most respected in commercial real estate.
 
In my conversation with Prof. Mueller, he shared where each property type stands today, what signals matter most, and how CRE professionals should be thinking about the road ahead.

 
Market Cycle: Where We Are Now

  • Most Property Sectors Still in Growth Phase
    Despite headlines, the underlying fundamentals in many sectors are still solid. Industrial and retail are at or near peak occupancy, with retail benefiting from a decade of underbuilding. Hotels and some apartments are in expansion phases, while office remains in recession.

  • Office: Structural Downshift, Not Just a Cycle
    Post-COVID remote work has fundamentally reshaped office demand. Class A in prime markets (e.g., NYC) is thriving; B/C assets and suburban offices are struggling. Adaptive reuse (e.g., office-to-resi conversions) is being explored but not yet widespread.

  • Apartments: Strong Demand, But Misaligned Supply

    There's a 6.5 million unit housing shortfall, yet high-end, urban supply has overshot demand. Affordable and workforce housing remain undersupplied and present the most attractive opportunities.

What CRE Pros Should Track
  • Employment > GDP
    Mueller emphasizes employment growth as the single most reliable predictor of real estate demand. Despite economic noise, job growth remains positive, indicating continued underlying support for real estate fundamentals.

  • Occupancy Drives Rent, Not Price
    Mueller’s cycle model is based on physical occupancy, not asset pricing. Price movements are driven by capital flows, but true performance comes from rent and income growth – especially critical in today’s higher-rate environment.

Supply Trends by Sector

  • Retail: Nationally at peak occupancy. Almost all new space is pre-leased. Over a decade of cautious development has created a tight market.

  • Industrial: Slight oversupply after a COVID-era building spree but expected to correct by 2026.

  • Multifamily: Select markets are overbuilt (e.g., downtown Class A), but suburbs and affordable housing show structural undersupply.

  • Hotels: Bifurcated; leisure and conference travel rebounding; business travel still lagging.

Capital Markets Insights

  • Prices Are Down, and May Not Drop Further
    Higher interest rates have cooled pricing, but a wave of dry powder is still waiting. Institutional investors are sitting on capital and may deploy if prices stabilize rather than fall further.

  • Cap Rates Are Rising – But Slowly
    Cap rates haven’t adjusted upward as fast as borrowing costs, leading to negative leverage. Cash buyers dominate today’s market.

  • Defaults Without Distress?
    High-profile institutional owners (e.g., Brookfield) are handing back keys on offices; a sign of strategic exit, not systemic distress.

Geopolitics and Macro Outlook

  • Tariffs and Reshoring Could Reshape Demand
    Mueller sees Trump’s industrial policy (tariffs, reshoring) as a potential long-term positive for U.S. real estate, especially industrial.

  • Global Capital Still Engaged, But Cautious
    Foreign investors remain active, but currency shifts and geopolitical risk are reshaping cross-border flows.

Bottom Line for CRE Sponsors
  1. Know Your Local Cycle – Even in national downturns, markets like Norfolk, VA, Honolulu, HI, and Riverside, CA, are peaking.
  2. Prioritize Income Stability – Focus on tenants who weathered COVID and economic shocks.
  3. Watch Employment, Not Noise – Labor market data remains the clearest leading indicator for demand.
  4. Cash is King (for now) – With interest rates high and spreads compressed, unlevered buyers have the advantage.
  5. Position for Affordability – Whether in retail or multifamily, demand is strongest at the middle and lower price tiers.

I’m sure you’ll find Glenn’s insights as valuable as I did – and be sure to watch the episode as he guides us through slides of his latest report. As always, the goal is to help you make better-informed investment decisions by understanding where we are – and where we might be headed.

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University of Denver, Daniels College of Business

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