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Financial Cycles and Building Booms: A Supply Side Account

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  • Karl Beitel

    (Department of Sociology, University of California at Davis, One Shields Avenue, Davis, CA 95616, USA)

Abstract

In this paper, I undertake a reexamination of recent cycles of boom and bust in the US commercial property markets. I apply aspects of the post-Keynesian investment theory developed by Hyman Minsky to understand the causes of hyperextended building cycles, with particular attention paid to the 1980s boom. Periods of rampant overbuilding are found to be rooted in the distressed conditions of the commercial banking sector, which drove the banks to annex the commercial property markets as outlets for surplus credit capacity and to offset declining rates of profit. I explore how the existence of commercial property at the intersection of markets for space and markets for capital assets introduces distortions into the capital supply process and exacerbates tendencies towards overproduction and crisis. Conditions prevailing in the 1980s are contrasted to the current economic expansion, and the performance of the commercial property markets through 1999 is analyzed, to distinguish further the key control functions exercised by the commercial banks over market outcomes.

Suggested Citation

  • Karl Beitel, 2000. "Financial Cycles and Building Booms: A Supply Side Account," Environment and Planning A, , vol. 32(12), pages 2113-2132, December.
    • Handle: RePEc:sae:envira:v:32:y:2000:i:12:p:2113-2132
    DOI: 10.1068/a3362
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    References listed on IDEAS

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    1. H Leitner, 1994. "Capital Markets, the Development Industry, and Urban Office Market Dynamics: Rethinking Building Cycles," Environment and Planning A, , vol. 26(5), pages 779-802, May.
    2. James R. Barth, 1991. "The Great Savings and Loan Debacle," Books, American Enterprise Institute, number 918256, September.
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    Cited by:

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    2. Igal Charney, 2003. "Unpacking and Repackaging Regional Diversity: Office-Building Trajectories in Canada," Environment and Planning A, , vol. 35(2), pages 231-248, February.
    3. Vinci, Sabato & Bartolacci, Francesca & Salvia, Rosanna & Salvati, Luca, 2022. "Housing markets, the great crisis, and metropolitan gradients: Insights from Greece, 2000–2014," Socio-Economic Planning Sciences, Elsevier, vol. 80(C).
    4. Carlos Serrano-Cinca & Yolanda Fuertes-Call鮠 & Bego uti鲲ez-Nieto & Beatriz Cuellar-Fernᮤez, 2014. "Path modelling to bankruptcy: causes and symptoms of the banking crisis," Applied Economics, Taylor & Francis Journals, vol. 46(31), pages 3798-3811, November.
    5. Rachel Weber, 2010. "Selling City Futures: The Financialization of Urban Redevelopment Policy," Economic Geography, Clark University, vol. 86(3), pages 251-274, July.
    6. Peter Wissoker & Desiree Fields & Rachel Weber & Elvin Wyly, 2014. "Rethinking Real Estate Finance in the Wake of a Boom: A Celebration of the Twentieth Anniversary of the Publication of the Double Issue on Property and Finance in Environment and Planning A," Environment and Planning A, , vol. 46(12), pages 2787-2794, December.
    7. Heeg Susanne, 2009. "Wie Phönix aus der Asche?: Immobilienwirtschaftliche Forschung in der Geographie," ZFW – Advances in Economic Geography, De Gruyter, vol. 53(1-2), pages 129-137, October.

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