With economic news and predictions filling the headlines, it's hard not to wonder if we're heading into a recession. Even the brightest economists struggle to agree on where the economy is headed. Despite this uncertainty, there are investment opportunities, such as multifamily and industrial real estate, that can provide stability and growth during economic ups and downs.
Predicting recessions often feels like a guessing game, with economists providing a wide array of opinions. With the Fed battling inflation through aggressive interest rate hikes, some foresee a hard landing and damaging unintended consequences like the collapse of Silicon Valley Bank, while others expect a soft landing due to the resiliency of the labor market and the strength of the consumer.
What’s ironic about recession predictions is that they're often confirmed well after the economy has already taken a hit. This phenomenon can be attributed to the way recessions are defined and identified. According to the National Bureau of Economic Research (NBER), the official arbiter of U.S. recessions, a recession is defined as "a significant decline in economic activity spread across the economy, lasting more than a few months." In practice, this means that it often takes several months of economic data to confirm the onset of a recession. By the time the experts have crunched the numbers and come to a consensus, we're often already in the thick of the economic downturn.
The truth is, no one can predict with absolute certainty when a recession will occur. As investors, it's essential to focus on managing risks and capitalizing on opportunities, rather than attempting to predict the unpredictable.
Recession or not, fortunately there is still a way to find stability and opportunity for your portfolio: multifamily and industrial real estate. These asset classes have historically demonstrated resilience in the face of economic challenges, providing investors with a sense of security even during tough times.
Multifamily properties benefit from the ongoing demand for housing and a diversified rent roll with lease expirations throughout the year, ensuring a relatively stable rental income even during a recession. As for industrial real estate, secular tailwinds such as the rise of e-commerce and evolving consumer preferences bolster demand for warehouse and distribution facilities, particularly close to population centers where supply is constrained, making them a reliable investment option in the current environment as well.
This is not to say there isn’t and won’t be distress found within the multifamily and industrial landscape, but one seller’s distress is another buyer’s opportunity. We are seeing opportunities emerge from undercapitalized owners who don’t have the wherewithal to contend with the distress caused by higher interest rates, maturing high-leveraged bridge loan debt, and tightening of real estate. As a result, these owners are being forced to sell, which provides the opportunity to buy good real estate at very attractive bases.
As the market continues to evolve, it is essential for investors to remain agile and adapt to the changing landscape of opportunities. WDIP, as an investment manager, benefits from being part of a well-established organization like Walker & Dunlop, which provides a significant advantage. The scale of deal flow and access to proprietary transaction volume from Walker & Dunlop’s banking and brokerage teams allow us to respond more quickly to emerging opportunities. This affiliation also enables access to off-market deals that are not visible to other market participants, providing a competitive edge in identifying and capitalizing on unique investment opportunities.
Interested in learning more? Visit our website or contact a member of our team to explore the right opportunities for the current market.
All investments have risk of loss; past performance is not indicative of future results. Forecasts, forward-looking statements and other opinions are those of the author and subject to change.