In Their Own Words: What the Next Economic Downturn Will Mean for Commercial Real Estate

Commercial real estate continues to be on a tear, with many calling this ballgame extra innings. Most believe that the industry is healthy enough with strong core fundamentals to withstand a downturn. Diversification is key, with most c-level executives and market leaders advising to build a portfolio to span geographically with multiple property types and specialty sectors to insulate against headwinds. A focus on Class A product was a common theme, as many leaders believe Class B & C product will suffer the most when the economy decides to take a dip!

With low levels of borrowing and restrained levels of speculative development and increasing investors focusing on income, the markets prove to be in a strong place with solid core fundamentals. The commercial real estate industry continues to grow and remains healthy; however, the nation is at the tail end of the longest recovery since World War II. It is just a matter of time before we are impacted by some form of a correction, most likely in 2020 or 2021. This correction in my opinion will be much different than the last downturn and could be a healthy thing for our industry. Our industry is at an absolute capacity in building projects, training workers and educating talent, and this next slowdown could help us pause and play catch up on many different fronts. The word “cautiously optimistic” has been one used more recently by peers in my industry, and I believe that is great advice, while remaining prudent and prepared as we navigate the end of this cycle.

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