The clearest sign that a market has shifted from expansion into hypersupply is:

Correct Answer

D) Vacancy rising while construction completions keep arriving

Why this is correct: Hypersupply occurs when new supply (construction completions) continues to enter the market while demand weakens, causing vacancy rates to rise. This imbalance is the clearest signal the expansion phase has ended. Why the other choices are wrong: 'Cap rates compressing further' is wrong because cap rate compression typically signals strong investor demand during expansion, not hypersupply. 'Rents accelerating well past general inflation for years' is wrong because this describes the peak of expansion, not the shift into oversupply. 'Permits falling to a decade low' is wrong because falling permits signal a supply response to softening, which occurs after hypersupply is recognized. Exam tip: Watch for the lag between construction starts and completions. Rising vacancy with ongoing deliveries is the key transition point.