LIVE UPDATES: The State Of The Economy And Its Impact On Commercial Real Estate
Recession or no recession? That is the question.
Answering it is surprisingly tough, as each new data point seems to contradict the prior. The U.S. logged two quarters of declining gross domestic product in Q1 and Q2, often viewed as the technical definition of a recession. But jobs reports have stayed strong through the year, consumer spending has continued and GDP grew in Q3.
Still, many economists predict the country will fall into recession in the coming months.
And whatever happens with the broader economy, real estate may face its own downturn, as the Federal Reserve’s continued policy of raising interest rates has an outsized impact on the industry and demand falls across property types.
Bisnow is regularly speaking with economists and property experts about the state of the economy and its impact on commercial real estate, and we will keep this page updated as we publish new stories breaking down the recession risk.
Last updated: Nov. 4, 2022, 2:56 p.m. ET.
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‘Are We Landing Softly???’: Economists React To The October Jobs Report On Twitter
Nonfarm payroll employment rose by 261,000 jobs in October, ticking unemployment up 20 basis points to 3.7%, the Bureau of Labor Statistics reported Nov. 4. Economists saw the data as a sign the U.S. may avoid a recession.
Separately, the St. Louis Federal Reserve reported Nov. 3 that the country hasn't been in a recession this year through September, its most recent data.
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JLL Increases Severance Costs As It Reckons With Slowing Investment Climate
JLL spent $9.4M in Q3 on severance and other employment-related charges, up from $8.3M in Q2 and $1.2M in Q3 2021. Its net income fell 40% last quarter despite a 6% increase in revenue.
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Emerging Trends Report: Real Estate Hasn’t Been This Starved Of Capital Since The GFC
ULI and PwC’s Emerging Trends in Real Estate Europe report showed debt and equity are scarce, which is leading to a refinancing crunch. Experts predict profits and values will drop off in a big way in 2023, and the impact of increased interest rates will reverberate through the industry for years.
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LightBox Survey: 90% Of CRE Investors Concerned About Recession, But Optimism Remains
LightBox’s fall 2022 Investor Sentiment Report found 90% of respondents are concerned about the potential of a recession, the bulk of which worry it will hit in 2022. Only 36% said they are concerned about a recession in 2023, which LightBox said indicates people are expecting a short-term “tap of the brakes” rather than a long-term downturn.
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After Another 75-Point Hike, Fed Chair Powell Said Rates May Go 'Higher Than We Thought'
The Federal Reserve increased its benchmark interest rate by 75 basis points again on Nov. 2, and Chairman Jerome Powell said more hikes are on the horizon.
“We expect that ongoing increases will be appropriate,” Powell said. “It’s very premature to be thinking about pausing. We have a ways to go.”
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CBRE To Lay Off Workers Amid $400M Cost-Reduction Plan
CBRE is laying off an undisclosed number of employees as it looks to shrink expenses in the face of a worsening economy.
The brokerage said in its third-quarter earnings report that its sale and mortgage originations activity have fallen off sharply and it now foresees a deeper recession than it predicted a few months prior.
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Huge Jump In Negative Leverage For CMBS Loans Bodes Ill For Property Values
About $5.5B of new CMBS issuance, 28% of what was originated in Q3, is facing negative leverage, meaning the cost of debt exceeds yields. That is a huge increase from previous quarters: Only 8% of loans were in negative leverage territory in Q2 and only 2% was in Q3 2021.
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GDP Bounces Surprisingly In Latest BEA Report, But Real Estate Takes A Beating
Real U.S. gross domestic product rose 2.6% in Q3, reversing two quarters of negative GDP growth. But the news isn’t as good for the CRE industry. Real estate was a drag on the economy, with investment in residential structures down 26.4% compared with the previous quarter and investment in nonresidential structures off by 15.3%. Residential investment subtracted 1.37 percentage points from GDP growth, the largest drag since 2007.
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‘Short And Shallow’ Recession In 2023, ULI, PwC's Emerging Trends Report Predicts
Commercial real estate players think the U.S. will slide into a recession next year, but they think it will be “short and shallow,” according to the Urban Land Institute and PwC’s 2023 Emerging Trends in Real Estate report, which broke down what CRE professionals think will be the defining trends of 2023.
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PODCAST: Morgan Stanley Real Estate Investing Co-CEO Lauren Hochfelder
Lauren Hochfelder, the co-CEO and head of Americas for Morgan Stanley Real Estate Investing, sees a seismic shift ahead for how the property industry makes money as the macroeconomic environment wavers.
“The industry overall has seen the greatest share of value appreciation from cap rate compression,” she said. “We certainly cannot rely on that going forward — and in fact, the complete opposite.”
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Pension Fund Leverage Crunch Could Mean A Drop In Money For Property
UK pension funds’ exposure to liability-driven investments has caused problems in the wake of interest rate increases. The result? Many may decrease their investment into real estate as they look to increase their liquidity.
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Frozen Debt Markets, Local Pushback Chipping Away At Industrial Cash Cow
Even industrial is feeling the pain, as businesses hold off on making decisions and lenders stop issuing loans while the world waits to see if a recession is on the horizon.
“I've never been in a market where we have 2.5% vacancy and you can't find a capital partner,” Trammell Crow Co. Managing Director Andrew Mele said. "It's the most interesting thing. And I get it, people are like, 'Hey, let's not catch a falling knife ... let's wait six months.'”
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Meet Deano: He's Got A Problem. Soon It Will Be Commercial Property's Too
The average person is likely to get a rude awakening from the shifting markets. Rising interest rates are affecting the ability to get loans, and the lack of access to cheap credit and low mortgage rates will alter the way people live their lives and spend their money. Real estate will feel the reverberations, from the immediate and obvious (homebuying) down to less clear (retail and hotel usage).
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As New Projects Get Harder To Start, D.C. Developers Dust Off Their Recession Playbooks
CRE professionals who rode out the Great Recession are starting to see some similarities to 2009. That can mean pain — and that can mean opportunity.
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Interest Rate Hikes May Slow Data Centers, Just Not As Much As Other Sectors
Data centers may see a price correction from the shifting capital markets, but experts say investor demand for the property type should keep it from feeling too much pain, even if there is a recession.
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Fire Sales To Come As Capital Values To Fall 35%, Major Reports Say
The inability to refinance may drive UK property investors to sell their assets at deep discounts, Oxford Economics and Bayes Business School warned in separate economic forecast reports that predict increased distress is on the horizon for the industry.
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Dwindling Transactions, Lender Clampdown Make CRE Environment 'A Massive Slap In The Face'
Transactions have slowed to a crawl, making comps difficult. Banks are requiring reappraisals, if they’re lending to commercial real estate at all. It’s a sad new world for an industry that has had it much easier for decades.
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Biggest UK Property Value Drop Since Brexit Vote As Fear Becomes Reality
UK real estate values fell 2.6% in September, the largest decline since the immediate aftermath of the country’s vote to leave the European Union. All asset classes saw their valuations drop, but industrial fell the furthest. At the top of the heap is residential, whose values only dropped 0.2%.
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PODCAST: Industry Vet Ed Cross On Why The Merchant Development Model Is About To Break
Decades of declining interest rates have shaped how commercial real estate invests. The reversal of that trend and an increase in cap rates will likely have an outsized impact on hold times; gone may be the days of the merchant builder, who develops with the intention of selling quickly.
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Peter Linneman On The Economy: Keep Calm And Carry On
Don't call it a recession in CRE, call it a correction, according to Linneman Associates founder Peter Linneman.
“Interest rates going up, at least to a certain point, gives a better signal of where money should be flowing,” Linneman said. "And that will enhance economic output."
He said rising interest rates will balance out supply and demand in the industry within a year, easing inflation and landing the market in a much healthier place than it has been.
“Don't get distracted,” he said. “Focus on the asset, focus on the fundamentals. And I think if you do, [you will find] this is not such a bad time.”
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'A Huge Surprise': Multifamily Rent Growth Turns Negative As Demand Drops
Apartment rents have been steadily rising for years. But in Q3, that abruptly reversed. Even more surprisingly, net absorption was negative across the U.S. last quarter, which analysts attributed to renters hesitating in the face of inflation and recession fears.
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'Inching Towards Cooling': Economists React To The September Jobs Report On Twitter
Job growth continued but slowed a bit in September, leading some economists to say the data could indicate a “soft landing” rather than a looming recession.
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Student Sector Can Prove Its Countercyclical Chops During Current Turmoil
Student housing is typically seen as a recession-resistant asset class, and investors often turn to it when times get rough in other sectors. That will be put to the test in coming months.
Read the full story here.
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As Market Volatility Continues, What Will Happen To CRE Lending?
Uncertainty in the commercial real estate market is starting to drive activity down, with buyers, sellers and lenders all pausing to see what the new normal will be with interest rates and property valuations, Money360 CEO Tom MacManus said.
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Hybrid Is Here To Stay Even If There's A Recession, CRE Leaders Say
Market watchers are starting to move past the question of whether a recession is looming and instead focusing on what impact that recession could have. An economic downturn could shift the balance of power back toward employers and drive reluctant workers back to the office, but experts said that swing would likely be short-lived: The changes in office usage are expected to outlive economic cycles.
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Investor Backs Out Of Deal To Buy €1.3B Credit Suisse HQ
A Korean investor rethought its decision to buy the Zurich headquarters of Credit Suisse, citing wider market uncertainty related to rising interest rates and the impact on asset values. Meanwhile, Credit Suisse has been under the spotlight and dealing with share price drops as rumors swirled it might run out of capital.
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Opportunistic Investors Awaiting A Wave Of Office 'Value Destruction'
Buyers targeting distressed assets are watching the storm clouds gather on the horizon and have their eyes on the office market. There will be deals to be had there in the next few years, some said.
“I really haven't invested in office in the last 14 years,” PGIM Real Estate Global Chief Operating Officer and Head of U.S. Equity Cathy Marcus said at Bisnow’s National Finance Summit in late September. “I think that in the next year or two, it'll be a heck of a lot more interesting than it has been for a really long time.”
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REITs Slammed, £500M Deal Collapses, Rates Head For 6%: The Pound And UK Markets Are In Turmoil
Weakness in the UK economy is already killing commercial real estate deals. The pound reached its lowest value since 1985 on Sept. 26, and analysts expect it to drop even further and reach parity with the U.S. dollar by November. Inflation is already at 40-year highs and is expected to continue to rise, and the stock market is hurting. In response, LXi REIT pulled out of a deal to buy 18 supermarkets from Sainsbury’s for £500M at a yield of 5%.
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PODCAST: Barings U.S. Head Of Real Estate Strategy On Rate Hikes And 'What Breaks In The Meantime'
In this episode of Bisnow Reports, Barings U.S. Head of Real Estate Research and Strategy Dags Chen talks through the rapidly diminishing probability of a soft landing for the economy.
After the Federal Reserve raised rates by 75 basis points again last week — and signaled more hikes are coming — Chen said inflation is the key metric to watch for real estate players hoping to prepare their portfolios for a downturn.
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China Shipping Prices Plummet Due To Worsening Economic Conditions
Container volumes and prices have returned to pre-pandemic levels as inflation has hit consumer spending and Chinese logistics businesses in particular have felt the sting. The cost of a 40-foot shipping container from China has dropped 50% over the last three months.
Facing the same headwinds, FedEx missed on its earnings and is closing 140 locations in the United States. The company’s stocks fell after CEO Raj Subramaniam said he believes a global recession is imminent.
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Real Estate Stocks Take A Hit, Some Prove More Resilient
The stock market was pummeled in late September, with the NYSE Composite index ending Sept. 23 down nearly 20% year to date, and the Dow Jones Industrial Average falling below 30,000 for the first time since June. Real estate companies were not immune. The FTSE Nareit All Equity REITs index lost 1.24% on Sept. 23, down more than 25.5% for the year. The FTSE Nareit Real Estate 50 index, which tracks the performance of the large-cap real estate sector of the U.S. equity market, hasn't done quite as poorly, but it is still down nearly 18% for the year.
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'Dark Days Ahead': How KKR, Apollo, Invesco View CRE Investing In A Recession
For the leaders of some of the biggest investment vehicles in commercial real estate, the matter of whether the U.S. is on the verge of a recession is no longer a question of if, but when.
KKR Head of Real Estate America Chris Lee said his firm is now predicting some form of mild recession in 2023.
“It's gonna be an interesting time on the optimistic side, but also a time where values will continue to deflate in the short term,” Lee said. “I think there will be some people forced to, maybe not trade assets, but will need some sort of structured capital.”
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Financial Tycoons Warn Of Hard Landing For Economy After Latest Fed Action
The Fed’s decision to continue raising interest rates has some in the financial world on edge. Carlyle Group co-founder David Rubenstein, Starwood Capital Group CEO Barry Sternlicht and DoubleLine Capital CEO Jeffrey Gundlach spoke out after the September rate hike, saying the central bank is being too aggressive and it will cause unemployment to jump above 5%.
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Here Comes The Wrong Kind Of Inflation, And It Could Destroy Real Estate Values
The world has been watching transitory inflation, which is caused by sudden supply constraints leading to knee-jerk price spikes that ease when supply returns to normal. But less attention is being paid to embedded inflation, which is more chronic and harder to escape. Embedded inflation occurs when consumers and businesses alter their spending patterns in a more permanent way. Multiple global economies may already be here, creating a new normal for wage and commodity pricing.
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Cold Storage Feels The Chill Of Inflation, Power Costs
Cold storage is often presented as a recession-resistant property type, but it, too, is dealing with headwinds. Though demand is expected to continue to insulate the asset class, it is being challenged by inflation and rising interest rates, labor woes, the increasing cost of energy and general economic uncertainty.
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Big Banks Pulling Back On New CRE Loans As Interest Rates Rise
After setting records for commercial real estate lending earlier this year, the country's biggest banks are changing course and planning a pullback, citing weakening demand and concerns about the effects of higher — and still increasing — interest rates.
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With A New Monarch And New Prime Minister, UK Real Estate Faces A New World Of Uncertainty
The UK’s property sector has prevailed amid a slew of hits in recent years, from Brexit to the pandemic. But the combination of a new prime minister, rising interest rates, falling value of the pound and a looming recession could take its toll on the industry.
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Fed Raises Interest Rates 75 Basis Points, Signals More Hikes To Come
The Federal Reserve increased interest rates another 75 basis points on Sept. 21 and signaled additional large increases are on the horizon as it pushes to get inflation below 2%. Federal Reserve Chairman Jerome Powell said the spiking cost of shelter is a major component of inflation and that the housing market is probably in need of a correction.
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More Regulation, Less Revenue: What CRE Execs Worry About For 2023
Chief financial officers for commercial real estate firms are feeling a lot more pessimistic these days, according to a global Deloitte survey. Only 40% of the 450 surveyed said they expect to finish 2022 with higher revenues than last year, while 48% expect lower revenues. Still, the CFOs said they feel good about real estate’s overall fundamentals.
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Inflation Surprise Means More Pressure Ahead For Commercial Real Estate
The U.S. consumer price index rose by 8.3% year-over-year in August and by 0.1% over July, surprising economists who expected slowing inflation and bringing recession fears roaring back. The prospect of further monetary tightening could have more profound effects on the commercial real estate sector than the last round of hikes.
“If you're in real estate, you are in recession. It's just a matter of time when it goes to financing, refinancing, restructuring. It's going to show up,” said Rajeev Dhawan, the director of Georgia State University's Economic Forecasting Center. “The cost of doing business is going to be much higher.”
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The Heat Is Off? Recession-Related Valuation Drops Could Douse Overheated Markets
Real estate valuations will be one early victim of increased interest rates and any looming economic downturn, experts say. Cushman & Wakefield forecasts every property type will see valuations drop in 2023, though the effects will be uneven. Some of those cuts will be more of a correction than indication of trouble; industrial, for example, is expected to see its valuations drop 14.1% but that is because values have become so inflated over the past few years, Cushman said.
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Facing $1T Shortfall, Pensions Scale Up Real Estate Investments In Search Of Returns
A number of economic and sociopolitical factors have taken a bite out of pension funds — this year is expected to result in the biggest single-year drop in funding ratios for retirement systems since the Great Recession.
But that’s actually good news for commercial real estate.
Capital markets experts predict pension funds will lean more heavily into CRE investment to cover shortfalls in other buckets.
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'Soft Landingish': Economists React To The August Jobs Report On Twitter
Another unexpectedly positive jobs report eased concerns that the U.S. is heading toward recession. The country added 315,000 nonfarm jobs, and unemployment ticked up from a decades-long low of 3.5% in July to 3.7% in August.
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Multifamily Lending Leadership On How Market Volatility Impacts Investment Strategies
Volatility in the multifamily space is shifting investors' strategies and pushing borrowers toward fixed-rate loans. Leadership from real estate finance firm NewPoint Real Estate Capital spoke with Bisnow about the shifts in multifamily capital markets.
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With Recession Likely, U.S. Property Values Could Drop 20% By 2023, Cushman & Wakefield Projects
Cushman & Wakefield is operating on a baseline assumption that the U.S. will slide into a mild recession in Q4 2022 or early 2023 and that property values will drop 20% in the next two years as a result. It put this scenario at 50% probability and said the result would be that by 2026, property values would be 90.8% of 2021’s peak.
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Inflation Ticks Down, Consumer Spending Barely Budges
The personal consumption expenditures index, one measurement of inflation, dipped from June to July, according to the U.S. Bureau of Economic Analysis. The PCE index, which measures prices paid by U.S. households, was up 6.3% year over year in July, compared to a 6.8% annual increase in June.
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Recession Dead Ahead, Economists Believe
A recession will hit the U.S. in the near future, nearly half of economists surveyed by the National Association for Business Economics said in early August. Nineteen percent of the 200 economists surveyed said the country is already in recession, 47% said a recession will begin by the first quarter of 2023, while 26% said a recession would not hit until Q2 2023 at the earliest.
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Is A Recession On The Horizon? An Economist Weighs In
There is a 40% chance of the U.S. landing in a recession within the next year and about 50% chance of it happening in the next 18 months, according to Moody’s Analytics Head of CRE Economics Victor Calanog.
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UK Property Lenders' Patience Is Going To Be Stretched, But It Won't Break
Changing markets may mean that lenders can’t provide as much forbearance as they have in the last few years. But experts say there likely won’t be a sharp, sudden spike in foreclosures, and pain will likely be more isolated to specific asset classes or markets that are struggling.
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Retail REITs Nonplussed Ahead Of Possible U.S. Economic Downturn
Inflation has slowed, easing the pain on consumers’ wallets, and Q2 reports from retail REITs show they are feeling pretty good about the economic impact on their real estate. Sales are up, occupancy is up and leasing volume is healthy, CEOs of major REITs said.
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If You Want Good Returns In This Uncertainty, Be A Lender
Lenders are getting better risk-adjusted returns in the UK real estate market than investors, according to a research paper from CBRE Investment Management.
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Recession Fears Squashing Deals: Bisnow Survey
CRE professionals are divided on whether the U.S. is already in recession, but the combination of rising interest rates and uncertainty over the economy is killing real estate transactions, even in hot asset classes like industrial.
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UK Real Estate Values Fall For First Time In Ages — With Industrial Leading The Drop
As investors try to suss out what happens to demand if there is a broader economic downturn, real estate values dropped 0.5% in July. It was the first decline in average building value in more than a year. Industrial recorded the steepest decline, 1.4%.
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The Recession Means It's UK Single-Family Rental's Big Moment
Single-family rentals are poised to expand if the UK economy shrinks. The sector is seen as recession-resistant, and anything that weakens the economy tends to drive residents to rentals — and investors are viewing SFR as less risky than multifamily.
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FDIC To Increase Scrutiny Of Banks' CRE Loans
The Federal Deposit Insurance Corp. plans to increase its stress testing of banks that have a high concentration of commercial real estate loans. It cited uncertainties around the future of work and shopping as “adding dimensions of risk” to property loans.
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'BEST RECESSION EVER!!!': Economists React To July Jobs Report On Twitter
The July Jobs Report from the U.S. Bureau of Labor Statistics blew away expectations. Nonfarm payroll employment rose by 528,000 jobs in July, bringing the unemployment rate down to a decades-low 3.5%. Many economists took the job growth as an indication the U.S. is not in a recession.
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Debt Funds Smell Opportunity As Banks Step Back From CRE Lending
Worsening economic forecasts and rising interest rates have pushed banks toward the sidelines in terms of CRE lending. But that doesn’t mean CRE players can’t get financing — alternative lenders like debt funds are stepping up to fill the gap.
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Recessionary Fears Bring Life Sciences Back Down To Earth After A Meteoric Rise
Investment sales of life sciences real estate are down 34% year-over-year in the first half of 2022. Rent growth and asset valuation are both also declining. Though economic slowdown may be contributing, experts say the drop isn’t concerning because the industry has been overheated.
Though downturns are often particularly hazardous for secondary markets, experts predict emerging life sciences cities will be insulated by their low barriers to entry and growing labor pools.
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As Values Drop, Here’s How To Catch A Falling Knife Without Getting Cut
As real estate values start to fall in the wake of rising interest rates and an economic slowdown, investors with cash to spend have opportunities.
But knowing when to buy in a falling market is one of the trickiest skills in real estate investing.
Bisnow spoke to six veteran investors about gauging when and how to buy as a downturn looms.
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PODCAST: Recession Fears And Where Global Uncertainty Is Putting Deals On Ice
On this episode of Bisnow Reports, Bisnow UK Editor Mike Phillips discusses how international real estate investors are behaving amid global uncertainty, where deals have been put on ice or stalled as a result of the market, and what it may take for the standoff between buyers and sellers to end.
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SURVEY: What A Recession Means For CRE
Tell Bisnow about how recession fears are impacting your business.
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Soft Landing Or Deep Recession? Whatever Is On The Horizon Isn’t Like Any Other Downturn
Nothing in history looks quite like this moment, making a path forward murky. But experts say if there is a recession, it will most likely be similar to the dot-com bust of 2001 and won’t hit the depths of the Global Financial Crisis of 2008. CRE is unlikely to face broad pain, economists said, but there would be some soft spots: Single-family homebuilders and UK property are more likely to struggle than industrial and U.S. assets, for example.
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Canceled Contracts Pile Up As Real Estate Buyers, Lenders Reckon With Rising Rates
As economic uncertainty and borrowing costs increase, commercial real estate deals are falling apart. Property pricing is down. Mortgage origination is down. Investment sales deal flow is down. Even hot asset classes like industrial are taking a hit as investors either lose confidence and pull out or decide to hold off in hopes of a better deal down the road.
“No one's immune,” Alliant Strategic Development co-founder Eddie Lorin said. “Everybody is getting repriced.”
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The World Bank Sounds The Stagflation Alarm Bell: What You Need To Know
The World Bank began warning of a global recession in June. The red flags it identified were the economic toll of the Russia-Ukraine War, global supply chain problems, continued coronavirus-related lockdowns and price hikes on gas and food. It halved its global economic growth forecast to 2.9% this year. Bisnow broke down the prediction for stagflation that combines price inflation with weak economic growth and what it might mean for CRE.
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Driving With The Rearview Mirror: CRE Needs A New Roadmap For Recession Risks
Developers' and brokers' reliance on backward-looking data like historical leasing trends can cause trouble as economic pain looms. Mismatches in pricing expectations between buyers and sellers and a disparity between bankers’ forecasts and the goals of potential property buyers can be especially prevalent as fears of recession rise. Bisnow’s reporting offers tips on looking forward to get through the cycle.
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Broker Confidence Plummets On Interest Rates, Recession Fears
New York City brokers are worried about real estate’s outlook, according to the Real Estate Board of New York's confidence index. Confidence in the market’s direction plummeted from Q1 to Q2 and is back to levels seen in the most uncertain days of the pandemic.
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CRE Investors Are Feeling Less Confident Than At Any Point Since April 2020
Brokers are lagging investors, who reported their confidence plummeted in Q1. The Commercial Real Estate Finance Council Board of Governors' Sentiment Index fell 23% from the end of 2021 to the end of Q1 2022, putting investor confidence around the same level as April 2020 when the pandemic was upending the world.
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'Can't Stop, Won't Stop': Economists React To June Jobs Report On Twitter
Job growth is one of the main indicators pointing away from recession. The June Jobs Report from the Bureau of Labor Statistics showed employment rose by 372,000 jobs, keeping unemployment at 3.6%.
“The labor market is not even remotely suggesting recession,” one economist wrote, and the Economic Policy Institute said the labor and wage data indicated the Federal Reserve didn’t need to keep raising interest rates to moderate inflation.
Still, the Fed hiked rates another 0.75% three weeks later.
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The Asset Classes Poised To Thrive As CRE Enters Recession ‘Danger Zone’: Moody’s
In June, Moody’s Analytics put the chance of a recession beginning this year at 33% and said there was a 50% chance of a recession starting in 2023. It predicted office and retail would bear the brunt of a downturn while multifamily and industrial would hold up well.
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Nearly 20M SF Of Spec Lab Construction Is Available As Demand Is Set To Drop
Life sciences real estate has been one of the hottest tickets in town, but cracks are starting to show as the economy wobbles. The most notable is a drop in venture capital funding, which will limit expansion of life sciences startups. The timing could be brutal, as the development industry has raced to build up a pipeline of projects that could be left sitting empty if demand dries up. CBRE predicts 29.1M SF will be built in the next two years, and only 26% of it is pre-leased.
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Recession In 2022? U.S. Self-Storage Says Bring It On
In times of recession, some investors turn to self-storage as a safe bet, and the asset class is gearing up for an influx.
“Self-storage has proven over time to be recession-resistant, and if we're not already in a recession, we are certainly headed for one,” said NAI Horizon Executive Managing Director Denise Nunez, a self-storage specialist.
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Commercial Construction Starts, Plans Increase Despite Recession Warning Signs
Thus far, construction starts seem to be unaffected by rising interest rates. The Dodge Momentum Index found groundbreakings were up 4% month-over-month in May and nonresidential starts were 20% above the seasonally adjusted annual rate.
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'So Far, Nobody's Panicking': CRE Evaluating Strategies As Stocks Dive With Rest Of Market
The stock market officially became a bear market in June, and real estate equities took a hit along with the rest of the market. The FTSE Nareit All REITs index fell more than 21% from January to mid-June. Players in the commercial property industry said the shock to the market caused investors to rethink their strategies but that real estate fundamentals were still healthy, so they weren’t seeing any panic-driven decisions.
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Industrial Is On The Brink Of Overbuilding
So far, industrial’s fundamentals are staying strong, reflecting years of e-commerce sales growth. But if the music stops, it may find itself quickly in overbuilding territory. And there are reasons to be nervous — rapid inflation is expected to impact retail sales, and online sales growth is already slowing. Green Street is predicting e-commerce to become a significantly smaller driver of industrial demand and forecasts that occupancy will drop over the next three years.
