Is the US in a recession now?
The specter of recession is yet another worry, posing as a potential threat to recovery. “The range of projections of whether and when we will enter an economic recession is extraordinary,” Rubin noted. “Culling through the noise, the consensus seems to suggest a recession later this year that will be relatively benign. After all, the job market is amazing and GDP growth has been remarkably resilient at an almost 3% annualized rate in the fourth quarter of 2022.”
Talk of recession invariably makes businesses and individuals nervous, tending to reduce demand for space, Rubin observed. “If we have a more significant economic recession, the real estate industry will have to deal with falling demand, slower leasing, and falling rents on top of coping with a higher cost of capital,” he said.
“Any further reduction in demand could be the straw that breaks the camel’s back for the office sector, already suffering from tenants wanting to shrink their footprint. The hotel business, which has thrived during the past year, could be hampered by a pullback in leisure travel once the “R” word is uttered by the powers that be.”
Rubin observed the brief time in which the markets were thrown into uncertainly given market volatility: “In only one year, the formerly robust multifamily and commercial real estate sectors became entangled in a web of demographic, geopolitical, and economic dynamics that are interconnected and complex, creating an atmosphere of uncertainty and risk, threatening investment yields and property values, and constraining liquidity and transactions,” he noted. “The longer the uncertainty, the greater the likelihood of distress.”
Source: mpamag.com