The New Real Estate Cycle Begins

A Mild Ending, A Fresh Start: Richard Barkham’s Post-CBRE View of the CRE Market

 

The End of a Cycle - Without the Crash

After 40 years in the field and a distinguished final act as Global Chief Economist at CBRE, Richard Barkham’s take on the state of commercial real estate is disarmingly calm. “This has been the mildest end of cycle that we've seen in 40 years – in fact, in my whole career,” he says.

Unlike previous downturns - 1989, 2000, 2008 - which were accompanied by macroeconomic crises, today’s cycle-end feels strangely undramatic. Vacancy rates have risen, prices have declined 25-30%, and capital markets activity has bottomed out, but there’s been no systemic financial collapse.

 

Why?

 

In Barkham’s view, the macro cycle hasn’t ended. “We've got the end of a real estate cycle, but no end of the macro cycle.” Yet.

 

This divergence - CRE in a correction, the economy still growing - frames his optimistic outlook for real estate.

 

Stimulus, Not Stability

The recent U.S. tax bill has added short-term fuel to the macro picture. Barkham describes it as a “stimulatory” package: it injects fiscal stimulus into an already resilient economy, even if the longer-term consequences include rising national debt and pressure on Treasury yields. "There’s a degree of stimulus in that bill… which will allow a certain amount of certainty, confidence and stimulus to boost growth.”

 

But not all stimulus is equal. Barkham worries that “the higher the debt-to-GDP ratio goes, the more upward pressure there is on the ten-year Treasury,” which forms the basis for CRE pricing. He sees an elevated 10-year yield, anchored in the 4–4.5% range, as a likely headwind for valuations, particularly for highly levered deals.

 

Still, he believes the U.S. economy can absorb this, at least for now. “The U.S. isn’t going to fall over,” he says. “The tax bill will boost growth, but it will also keep the ten-year Treasury elevated.”

 

Banks Are Lending Cautiously

Contrary to headlines about a $950 billion wall of maturities and doom-laden refinancing cliffs, Barkham is sanguine about debt markets. He credits both the structural health of CRE and the Fed’s deft handling of last year’s banking turbulence.

 

“Banks have been very, very unwilling to take loans back,” he explains. “Where assets can still service loans, banks have been willing to extend… There might have been some cash in refinancing, but the wall of debt is a non-issue, frankly.”

 

Even deregulation in the new tax bill could loosen credit conditions further. Barkham predicts larger banks will expand their share of real estate lending as capital requirements ease. “That just broadens the source of debt, which is good for market liquidity,” he says.

 

The Start of a New Real Estate Cycle

While macro conditions may be mid-to-late cycle, CRE is in Barkham’s view at the start of a new cycle. The real estate cycle that began in 2014 has ended, and signs of early recovery - vacancy stabilization, limited new construction, and a flight to quality - are evident.

 

“You’ve got all the inventory from the last cycle… people are moving into newer, better assets,” he says. “Eventually, when that runs out, new development resumes. But we’re not there yet.”

He sees real estate as “very investable right now,” particularly for those concerned about inflation. “If we are in a higher inflation environment - with the stimulus, with the pressure on the Fed politically to bring down interest rates - then I think it’s a good time to invest in real estate.”

 

Inflation, Interest Rates, and the Fed’s Delicate Dance

Barkham’s macroeconomic outlook is nuanced. While he acknowledges the Fed may eventually ease, trade tariffs and domestic manufacturing policies could delay rate cuts by adding inflationary pressure. “It’ll take a while for the Fed to make sure tariffs don’t feed into second and third round inflation,” he notes.

 

He pays special attention to real interest rates - the difference between nominal rates and inflation expectations - as a signal of latent financial stress. If inflation surprises to the downside, as it has recently, real rates rise and that can squeeze assets across the economy.

 

But he tempers this with perspective. “Real estate tends to do quite well over the long term. Not necessarily in the six- or 12-month period, but over time.”

 

Sectors to Watch: Healthcare, Digital, and Travel

Demographics and technology shape Barkham’s long-term sector views. He sees aging as a structural tailwind but cautions against oversimplifying it. The boomer generation, now in their 60s and early 70s, are not just healthcare consumers, they’re also travelers.

 

“Those are prime-age travelers,” he notes. “If you're looking for sectors that are going to benefit from boomer retirement, look at travel… everything from Airbnb to different hotel types.”

 

Healthcare and digital economy trends also feature prominently. He encourages investors to monitor how people are working, living, and consuming services. Hybrid work and digital delivery models are reshaping occupier demand and investors must follow these patterns, not just macro charts.

 

Final Advice: Keep Leverage Low, Go Prime

For those looking to deploy capital now, Barkham’s advice is clear and grounded: “Keep your debt low. Focus on prime grade assets. Invest in the sectors that have the tailwinds of demographics and technology.”

 

The key is to remain alert to tenant exposure and the consumer's vulnerability in any upcoming recession. “Just watch the sensitivity of your real estate to a consumer downturn,” he warns.

With policy uncertainty, an aging population, and structural change across industries, Barkham offers a final reminder: real estate is both cyclical and structural. The best strategies pay attention to both.

 

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In this series, I cut through the noise to examine how shifting macroeconomic forces and rising geopolitical risk are reshaping real estate investing.

 

With insights from economists, academics, and seasoned professionals, this show helps investors respond to market uncertainty with clarity, discipline, and a focus on downside protection. 

 

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