A new study from Hines is turning the old cycle playbook on its head. The long-standing belief—buy when prices are depressed and build only once fundamentals are solid—isn’t necessarily where the best returns are found. Instead, Hines’ data shows that development may actually deliver stronger performance when it begins earlier in the cycle.

Breaking with tradition

Conventional strategy says: acquire at the bottom, develop in the upswing. But Hines’ research, drawing on datasets from NCREIF, JLL, CBRE, and more, suggests the opposite. Development returns are strongest early in the cycle, then fade as competition intensifies and pricing risk climbs. By contrast, acquisitions generally move in step with rising valuations—bringing higher exposure as markets heat up.

Key findings from 80,000+ market data points:

• Early Buy Phase: Asset prices are soft, and risk is about one-third below long-term averages. Institutional capital often stays cautious here, leaving room for developers to capture a premium.
• Late Buy & Sell Phases: Market fundamentals look appealing on the surface, but aggressive pricing erodes returns. Development margins shrink, while acquisition battles drive up costs.
• Development Advantage: Across most cycle stages (except the “Hold” phase), development strategies generated higher unlevered total returns than acquisitions—provided entry was well-timed.

Risk calibration

Hines evaluates risk using its own “cycle multiplier,” where 1.0 reflects neutral risk and lower scores reflect safer conditions. In the Early Buy phase, the average reading drops to 0.68—pairing lower risk with attractive five-year unlevered returns of 15.5%. Today, many U.S. office markets sit in this early-stage, lower-risk environment.

The timing edge

Two-year performance data consistently shows development outpacing acquisitions in the early and mid-cycle windows. Conversely, late-cycle building often disappoints despite strong demand signals—returns are diminished by elevated pricing and heightened risk.

Strategic implications

Instead of launching projects immediately in early-cycle uncertainty, Hines suggests securing land positions early and holding for the rebound. Lower competition gives investors more leverage at this stage. Later in the cycle, build-to-core models with longer holds tend to weather market shifts better than merchant-build approaches.

Bottom Line

The research challenges the outdated “buy low, build high” mantra. A more adaptive, data-led strategy points to development—especially early in the cycle—as a powerful way to capture superior risk-adjusted returns.