The U.S. is likely to enter a mild recession by the end of this year or early next year, and property prices will take a hit as a result. cushman and wakefield.
Securities giant’s latest economic forecastthe baseline assumption for the US economy is moderate recession Q4 of this year or early 2023 price go up inflation remains high. Of his four economic scenarios presented, the most likely, which the brokerage firm puts in his 50% chance, is that the war in Ukraine will continue, oil prices will remain high, and inflation will continue. is to continue.
In that case, Cushman & Wakefield estimates that asset values will fall by about 20% over the next two years, and between 4% and 23%, depending on the asset class. According to the model, by 2026 property prices will be 90.8% of their 2021 highs.
“A mild recession scenario… [net operating income] All product types have slowed, but all cases remain positive, except office,” the report said. It’s also worth noting that although NOI has slowed, it is much more resilient than past recessions like 2001, 2009 and 2020. “
Brokers say a scenario in which inflation slows and the Fed eases rate hikes sooner than expected could lead to a deep recession in 2024, leading to more than 30 declines in property prices, Staghf said. as likely (5%) as rations. %.
A soft landing outcome has a 30% chance of occurring, with GDP decelerating to 2% this year and 2023, and property prices returning to peak values by 2026.
Under a moderate recession scenario, cap rates will rise, with the steepest rises between 2022 and 2023, with industrial and multifamily assets experiencing the biggest jumps. The cap rate will then drop again from his 2024.
“Given all the macroeconomic uncertainty – supply chain issues, inflationary pressures, Fed rate hikes, declining consumer confidence, and many other headwinds – the most common question I hear from clients these days is ‘change? How does the environment in which we operate affect commercial real estate?’ Kevin Thorpe, chief economist at Cushman & Wakefield, said in a video discussing the findings. is a long-term investment, most investors don’t buy a building and sell it the next year…If you buy a property and hold it for five years, you get an average leveraged return of 52%.”