in touch | Real estate trends

What Should You Expect for Commercial Real Estate During a Recession?


The effects of a recession can be felt across many industries, and the commercial real estate market is no exception. A slowdown in economic activity can lead to a decline in property values, difficulty in finding tenants, and limited access to financing. However, it’s important to note that the impact of a recession on commercial real estate can vary based on property type and location.

Office buildings and retail spaces tend to be more vulnerable during an economic downturn since they rely on businesses to occupy the space. Industrial and warehouse properties, on the other hand, may be less affected since they are often leased to essential companies that are less impacted by economic downturns.

One significant impact of a recession on commercial real estate is a decrease in construction activity. Businesses may be less likely to invest in new construction or renovations, which can lead to a decline in construction jobs and overall economic activity. Additionally, banks and other financial institutions may be less likely to lend money for new construction projects, further slowing development.

During a recession, there may also be a decrease in demand for commercial real estate, which can lead to lower property values. Businesses looking to sell their properties may find it harder to do so or may have to sell at a lower price than they would during a more robust economy. On the other hand, businesses looking to buy commercial real estate may find good deals during a recession due to the lower prices.

Despite the negative impacts of a recession, commercial real estate can provide a haven since it is a tangible asset that can hold its value over time. The low prices available during a recession can create opportunities for businesses to invest in commercial real estate that provides long-term benefits.

While a recession can significantly impact commercial real estate, it’s important to remember that the market will eventually recover. Businesses that can weather the downturn and take advantage of opportunities available during a recession may be well-positioned for success in the long term.

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AARE and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

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