Net Investment Activity Technical Indicator
I posted a graph earlier that showed CRE net investment by space type. The graph below actually totals all investment activity across space type and also shows a four quarter moving average as sort of a technical indicator. I see most markets as being similar to the growth of a forest that needs a forest fire every once to reset things and let the forest begin a new growth cycle.
I’m certainly no technical expert, but it seems to me that the prolonged periods where the investment line is above the four quarter average are the growth periods. The prolonged periods below the four quarter average are like the forest fire periods. You can see from the graph that the four quarter average is approaching the investment line again and we may be getting closer to the end of that painful forest fire in CRE. The fact that the four quarter average is approaching the investment line means that the rate at which things are getting worse is slowing. You always need things to stop getting worse before they can start getting better.
To continue this analogy, it’s not like after a forest fire you get immediate wild growth again. Things start slowly and it takes time to replace a forest full of mature trees.
Here’s the million dollar question: Should the forest fire analogy or the technical graph have been the star of this blog post?
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