At this stage of the 18.6-year real estate cycle, assets go up.
Just look at the headlines if you need proof. The S&P 500 index is in record territory, as is gold, Bitcoin, and others.
Wherever you look, growth is everywhere.
That’s how it’s supposed to be.
It won’t last forever, but for now, the markets have been acting exactly as I predicted.
They have been growing and creating new and exciting speculations along the way.
These market crazes are also part of this stage of the cycle.
This time, it’s artificial intelligence (AI). Nobody quite understands how it works, but everybody wants to be in on it.
How AI Drives This 18.6-Year Cycle
Yes, nobody quite knows how AI is going to transform, if it will at all, our society.
Predictions run from super-bullish (people won’t need to work anymore) to extremely bearish (humankind is doomed).
I’ll leave these speculations to others.
My point is this.
Like every new and shiny thing that gets markets excited, AI is going to keep the 18.6-year cycle turning.
Here’s an example.
CBRE has recently released its North American Data Center Trend Report.
As a reminder, data centers are essentially massive warehouses packed with powerful computers, or servers.
They are home to “the cloud,” if you will.
And they are extremely important for both traditional computational tasks and those required to run AI models.
From CBRE:
Data center construction also reached a new high in H2 2023 with 3,077.8 MW under construction in primary markets, a 46% increase from the same time last year (2,109.2 MW). With AI driving demand across most major markets and project delays persisting, securing space early is crucial. To that end, 83% (2,553.1 MW) of under construction supply is already pre-leased.
Record levels of construction… largest pricing increases across the whole commercial real estate space…
Biggest, tallest, fastest, most expensive…
These words describe this stage of the 18.6-year cycle.
And AI is now driving commercial real estate prices, including data centers.
Meanwhile, “experts” are predicting the death of commercial real estate. While some of its sectors may not do as well as others, as a whole, the commercial real estate industry is alive and well.
What’s Next for the Cycle?
Over the next one or two years, not much will change.
Growth, available liquidity (lower interest rates will help), asset prices going up… from real estate and commodities to stocks.
I am not calling the end of the cycle yet. It’s not the time – yet.
It’s the opposite. Recent market records confirm my thesis that the 18.6-year cycle keeps turning.
This time, with the help of AI.
Regards,
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Phil Anderson
Contributing Editor, Inside Wall Street with Nomi Prins