Commercial Real Estate Checks Into the Heartbreak Hotel

By Danielle DiMartino Booth

“I walk a lonely street.” Written in 1955, those five haunting words were all one man left of himself before leaping to his death from his hotel room window. According to a story that ran all those years ago in the Miami Herald, it would seem that he had heartbreakingly embraced the loneliness of being unknown and unmourned. What compulsion had driven him to destroy all identity leaving no trace of who he had ever been?

From that lonely man’s pain came a classic. “Everybody in the world has someone who cares,” wrote Florida school teacher and songwriter Mae Boren Axton. “Let’s put a Heartbreak Hotel at the end of this lonely street.” Though accounts vary, Axton and fellow songwriter Tommy Durden are credited with collaborating to write the song that would launch the career of a legend, one Elvis Aaron Presley.

For a different but more notorious legend, its last lonely and likely unmourned symbol has finally been laid to rest with the sale of New York’s Nylo Hotel. Marking nearly eight years since Lehman’s bankruptcy, the sale of one of the last properties in the storied investment bank’s exhausted portfolio thus closes the wound on the $691 billion bankruptcy, the biggest in U.S. history.

Commercial Real Estate Checks into the Heartbreak Hotel

If eight years rings a bell for you, that’s because historically it’s just shy of how long economic cycles usually last. Commercial real estate (CRE) cycles tend to persist for a bit longer, about 10 years according to work by Christopher Lee of CEL & Associates, a real estate consultancy. Lee breaks typical cycles into four periods – Growth, Plateau, Crisis and Transition. Good entry points tend to present themselves in the Transition Period while good exit opportunities arise six months before or after the peak of the Plateau Period. That seems intuitive enough. Get in close to the ground floor of a cycle. Get out before the crisis hits.

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