Invest Here During a Recession

When a recession hits, the natural tendency is to shut down spending and look for a hole to hide in. When it comes to investing in commercial real estate, recessions and downturns can be the best time to expand and find solid deals. What is the best class of commercial real estate to invest in during a recession?

 It's multifamily housing. Evidence from past recessions shows the best value for real estate investing during a downturn is multifamily housing.  

Looking back to the recession of 2001, multifamily property rents declined less than those of office and industrial properties. Their growth rate post-recession was also higher. The recession of 2008-2009 numbers show multifamily rents were again more resilient than office industrial and retail. In fact, multifamily outperformed the other classes in terms of the lowest level of rent decline and the fastest recovery to pre-recession levels, and multifamily had the longest post-recession period of rent growth. In the numbers after the 2008 recession, it took just seven quarters for multifamily housing to get back to pre-recession rents. For office industrial and retail, it was more than 22 quarters before rent returned to pre-recession. 

That doesn't mean a recession is all roses and unicorns for multifamily owners. There will be some rent decline, and, in this recession, there could be some issues with forbearance and COVID-19 policies. That's why you build cash reserves into your portfolio during those good years. With some vacancies due to the recession, this might be the perfect time to rehab some of those units to get ready for some forced appreciation in the near future.

 That is why I believe multifamily housing is the best commercial real estate investment during a recession. If you're really serious about buying or selling multifamily real estate contact us at chris@stokesherzog.comor 715.450.4990.