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Recession Fears And Everything Real Estate Needs To Know

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Recession fears loomed large over commercial real estate throughout the year, and on July 28, the industry suffered another blow. US Gross Domestic Product fell for the second straight quarter.

Some may call this a technological recession, but many economists disagree, pointing to other fundamentals that seem to indicate economic strength, such as job growth. increase. Either way, tensions are mounting in the real estate industry and a broader recession could be on the horizon.

Is a recession imminent or already here? When will it hit and how long can it last? How bad will it get? Which real estate asset classes will be most affected and which will persist?

Bissnow regularly talks with economists and real estate experts to try to answer these questions. We will continue to update this page as we publish new articles analyzing recession risk.

Last updated: July 28, 2022 at 10:08 PM ET.

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Soft Landing or Deep Recession? Anything on the horizon is unlike any other recession

Nothing in history looks like this moment and the way forward is unclear. But even if a recession were to occur, experts say it would likely be more like the dotcom crash of 2001 and not as severe as the 2008 global financial crisis. Single-family home builders and UK real estate, for example, are more likely to struggle than industrial and US properties.

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Canceled contracts pile up as property buyers, lenders factor in rising interest rates

Commercial real estate transactions as economic uncertainty and borrowing costs increase is collapsingProperty prices are falling. Mortgage originations are declining. Investment sale deal flow is down. Even high-profile asset classes like industrial are taking a hit as investors lose confidence and decide to pull out or hold off in the hope of better deals in the future.

“No one is immune,” said Eddie Laurin, co-founder of Alliant Strategic Development.

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World Bank Sounds the Alarm on Stagflation: What You Need to Know

The World Bank began warning of a global recession in June. The red flags it identified were economic damage from the war between Russia and Ukraine, global supply chain problems, continued coronavirus-related lockdowns, and higher gas and food prices. We have cut our global growth forecast in half to 2.9% this year. Bissnow We analyzed the forecast of stagflation, which combines higher prices and weaker economic growth, and what it means for the CRE.

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Driving with rear-view mirrors: CRE needs a new roadmap for recession risk

When developers and brokers rely on historical data, such as past leasing behavior, financial pain can loom and cause problems. Discrepancies in price expectations between buyers and sellers, and between bankers’ expectations and the goals of potential property buyers, can be particularly prevalent as recession fears grow. Bissnowreport offers tips for navigating this cycle.

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Broker confidence plummets on interest rates and recession fears

New York City brokers are concerned about the outlook for real estate, according to the New York City Real Estate Commission’s Confidence Index. has returned to the level seen in

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CRE investors are less confident than at any point since April 2020

Brokers have lagged behind investors, reporting a sharp drop in confidence in the first quarter. The Commercial Real Estate Finance Council Board Sentiment Index fell 23% from the end of 2021 to the end of the first quarter of 2022, with the pandemic upsetting the world. has earned investor confidence in

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‘Don’t stop, don’t stop’: Economists react to June jobs report on Twitter

Employment growth is one of the key indicators of exiting a recession. Employment increased by 372,000 while the unemployment rate kept him at 3.6%, according to his June employment report from the Bureau of Labor Statistics.

“The labor market is not suggesting a recession,” wrote one economist, and the Economic Policy Institute believes the Federal Reserve does not need to keep raising interest rates to moderate inflation. He said the labor and wage data showed.

Still, the Fed hiked rates by another 0.75% three weeks later.

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Asset class poised to thrive as CRE enters recession ‘danger zone’: Moody’s

In June, Moody’s Analytics said there was a 33% chance of a recession starting this year, and a 50% chance of it starting in 2023. It predicted that while offices and retail would bear the brunt of the recession, multifamily housing and industry would continue. Often.

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Nearly 20M SF of spec lab construction available as demand is set to drop

Life sciences real estate is one of the hottest things in town, but cracks are starting to appear as the economy falters. Most notably, the decline in venture capital funding will limit the expansion of life sciences startups. Timing can be tough as the development industry races to build a pipeline of projects that could remain empty if demand dries up. It expects to build 29.1 million SFs per year, of which only 26% is pre-leased.

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Recession in 2022?US self-storage says it will bring

During recessions, the asset class is gearing up for inflows, with some investors turning to self-storage as a safe bet.

Denise Nunez, executive managing director and self-storage expert at NAI Horizon, said:

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Commercial construction begins, plans increase despite warning signs of recession

So far, construction starts appear unaffected by rising interest rates. Breakthrough products in May rose 4% month-over-month, while non-residential products outperformed the seasonally adjusted annual rate by 20%, according to the Dodge Momentum Index.

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‘So far, no one panicked’: CRE evaluates strategy as stocks plummet across rest of market

The stock market officially entered a bear market in June, and real estate stocks were hit along with other markets. The FTSE Nareit All REITs Index is down more than 21% from January to mid-June. Commercial real estate industry players say market shock has caused investors to reconsider strategies, but real estate fundamentals remain sound and no panic-driven decisions seen .

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Industry is on the brink of overbuilding

So far, industrial fundamentals have remained solid, reflecting years of e-commerce sales growth. But when the music stops, it can quickly slip into overconstruction territory. There is also reason to be nervous. Rapid inflation is expected to hit retail sales, and online sales growth has already slowed. GreenStreet forecasts that e-commerce will be a much smaller driver of industrial demand, with its share projected to decline over the next three years.

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