Will The Next Recession Affect CRE Returns?
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
*Through 1Q
Trailing 12-month average; Includes Apartment, Retail, Office, Industrial, and Hotel properties
Sources: Marcus & Millichap Research Services, NCREIF
