There is no denying that recent economic events, marked largely by the inverted yield curve, indicate an impending recession. The current cycle has been marked by tighter regulation, and investors and developers erring on the side of caution. However, they are poised to profit when the recession hits.
The next downturn is expected to be more concentrated and shorter given that most in banking and real estate have been preparing for it essentially since the last one ended. The period of economic growth is now the longest in US history and that has given companies time to plan and raise capital to take advantage of a market correction.
Retail looks to be the hardest hit as more and more brick and mortar stores fall victim to e-commerce. However, retail shells allow for profitable mixed-use redevelopments that include medical office and multi-family, largely considered to be safe havens in the downturn.
“The sector that would be the most countercyclical would be multifamily, especially now due to the shift from homeownership to renting as a lifestyle choice and a financial imperative,” Colliers International Chief Economist for the U.S. Andrew Nelson said.
The shift to e-commerce has also elevated the industrial sector which is predicted to withstand the shaky economic forecast. According to Deloitte, “Industrial real estate demand is expected to increase by 850 million square feet, to 14.8 billion square feet, by 2023.” In practical terms this is roughly the entire industrial inventory of two major cities.
Warren Buffett famously said, “Only when the tide goes out do you discover who’s been swimming naked.”
It’s time to suit up!