Align Your Commercial Real Estate Strategy with Market Conditions through JLL’s Property Clock

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By: John Sikaitis, Senior Vice President, Americas Local Markets Research,  Jones Lang LaSalle

Investors, landlords and tenants all seek differing market characteristics before committing to or adding a new property to their portfolio. But, how does each persona align strategy with current and forecasted market trends?

The Jones Lang LaSalle Office Property Clock is a proprietary tool used to visualize where a market fits in a given cycle. Markets typically move clockwise as market conditions change. A falling market occurs between 12:00 and 3:00, followed by a bottoming market between 3:00 and 6:00. The market rises and peaks, between 6:00 and 12:00, before concluding a full real estate cycle.JLL Property Clock

The property clock can help you shape strategic actions within particular markets. It applies to both the industrial and office markets, and can also be used to predict market upturns and downturns ahead.

However, favorable and unfavorable times differ according to your market intentions. If used correctly, landlords, tenants and investors can utilize the clock to enhance real estate decision-making. For example, landlords will generally favor markets that fall on the left side of the clock (between 6:00 and 12:00), while tenants should seek to become active in markets on the right side of the clock (between 12:00 and 6:00).

When the Clock Strikes 6:00: Landlord-Favorable Conditions

Landlord FavorableLandlords can use the clock to obtain a holistic view of the national market. This is particularly useful for landlords who own properties across various markets. Strategies for pricing and concessions will differ within each market, according to its position on the property clock.

Markets that range between 6:00 and 12:00 are ideal for landlords. Markets on the left side of the clock signify increasing rents and decreasing concessions.

Between 6:00 and 7:00, rents will slowly begin to increase. By 9:00, landlords typically see robust rent growth. While the market progresses upward on the property clock, space availability begins to dwindle. This triggers development, and eventually construction, which once again stabilizes the market (at 12:00). From there, depending on the cycle, the market either remains on the landlord-favorable side if the construction cycle is limited or moves to the tenant-favorable side if the construction cycle is a bit ambitious, over-supplying the market.

When the Clock Strikes 12:00: Tenant-Favorable Conditions

Tenant Favorable Once the market has stabilized from an up cycle, characterized by increased space availability, flatter rents and upticking concessions, the market willmoves slowly into the 12:00 to 3:00 range where conditions start to become ideal for tenants to enter the market and commit longer-term to real estate if their business warrants that type of decision. During this stage, as space availability increases, landlords will be forced to compete against one another, leading to lower rents and increased tenant improvement dollars.

When the clock strikes 6:00, the market flattens once again, and the cycle continues.

How Can Investors Read the Property Clock?

From an investment standpoint, the clock can be used to predict which markets will contribute to a healthy diversified portfolio.

Markets that sit at 9:00 indicate competitive conditions, which means limited space availability and likely greater investor interest in those markets. Investors have greater competition when looking at investment potential; however, high demand and heightened rent growth potential signify greater returns for owners and landlords who own assets in those markets.

As the clock moves closer to the right side, risks increase for investors as market conditions will start to slow, however, the longer-term reward could be higher too. 12:00 usually signifies a leasing market that has started to overheat and thus, some investors will move to the sidelines, meaning less competition from an investment standpoint, higher yields and lower pricing.

Of course, there are advantages and disadvantages at each stage in the cycle. Actions and strategies formulated based on the market’s current state will depend on individual investment goals, as well as individual threshold for risk.

The Property Clock Journey: Primary vs. Secondary Markets

Markets in Ohio, Michigan and Pennsylvania have lagged behind the national recovery. By property clock standards, this is normal.

A large majority of primary markets are driven by a single demand source, like finance, technology, energy or government. These markets are hit harder by significant ups and downs, and will move faster around the property clock. Investors are more likely to invest in these markets, such as New York, San Francisco, Houston and Washington D.C.

In contrast, secondary markets, like ours, are typically driven by numerous demand sources, not by a single industry sector. Therefore, these markets usually are not affected as much by big swings up and down. Market momentum must first be generated by several (if not all) demand sources. Only then will these markets see significant market growth or decline. Investors will typically favor secondary markets if they enjoy more stable, less risky conditions.

Primary and secondary markets move at differing speeds, but primary markets still have great impact on secondary markets. For instance, as industries nationwide continue to recover, our region’s cities have concurrently seen significant growth.

With Cincinnati, Cleveland, Columbus, Detroit and Pittsburgh currently (as of May 2013) at the bottom of the property clock, market activity in our region is picking up momentum; growth has returned. As the national market continues its path to recovery, our markets will follow—clockwise.

If you have any questions about the Property Clock, I’d be happy to answer them. Just share in the comment section below or email  me at

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About the Author

Research_Sikaitis_J2John is the Senior Vice President and Director of Office Research and Local Markets Research for the Americas. John works in conjuction with the JLL team of research analysts to compile customized research reports, which include marketing trends, forecasts, economic updates and more. View John’s full bio to read up on his experience and recent transactions.