SAN FRANCISCO—Late last year, I began research that examinedwhere we were in the current economic cycle and how that related tothe robust commercial and multifamily markets we were seeing atthat time. Now that 2013 is in the books and we have first-quarter2014 data available, I wanted to revisit that discussion.

At that time, the macroeconomic recovery was proceeding at apainfully slow pace. That sluggish trend, as predicted, hascontinued. While we attempt to extrapolate any good news regardingnon-farm payroll employment gains, the truth is that those gainshave been minimal to non-existent. If you assume we need to add onthe order of 150,000-200,000 new jobs each month just to keep upwith population growth, the data we've seen over the past severalyears has been disappointing. The unemployment rate currentlystands at 6.1% and from a statistical standpoint, we have recoveredall of the 8.7 million jobs that were lost during the recessionthat began in December 2007 and lasted until June 2009. Thesefigures may seem reason enough for optimism. But more telling isthe Labor Force Participation Rate, which is a measure of thepercentage of working-age persons in an economy who are eitheremployed or are actively seeking employment. While that measurestood at 66.0% in December 2007, it has trended downwarddramatically to its current level of 62.8% according to the Bureauof Labor Statistics. This represents the lowest rate since1979.

Despite these headwinds, the commercial and multifamily realestate markets have continued to thrive. For almost every propertytype in in every market, trends are headed in the right direction:rents and absorption rates are up and vacancies and cap rates aredeclining. This has led to a strong investment sales market, withvolumes surging at the end of last year. According to theMortgage Bankers Association and RealCapital Analytics, sales rose 28% in the fourth quarterover third quarter levels to finish the year at approximately $316billion, 19% ahead of 2012 levels.