What Would a Recession Mean for CRE Investors?
No Consensus on Timing of Next Recession
- Robust job gains, strong wage growth and steady retail sales suggest steady growth outlook
- However, exorbitant inflation, rising rates and falling stocks could slow spending, inducing a recession
How Severe Could the Next Recession Be?
- Both Health Crisis and Financial Crisis recessions hit economy and CRE hard, unlikely to happen again
- Recessions in 1981 and 1990 most comparable; preceded by high inflation and strong Fed action
- Full impact varies greatly by location and asset type
CRE Has Performed Well Through Most Recessions
- Returns for all property types softened in the 80’s, dipped negative in ‘91; Apartment saw the smallest declines
- Retail and Office experienced substantial downward pressure, followed by strong, steady growth
- Industrial had similar impact, but returns have outperformed in last few years
Trailing 12-month average; Includes Apartment, Retail, Office, Industrial, and Hotel properties
Sources: Marcus & Millichap Research Services, NCREIF
Watch the Video Below