Apartments are the Most Resilient to a Recession

Recession.

The word brings up images of financial hardship, loss of income and loss of wealth. The stock market, one of the most volatile investment classes, typically experiences gut-wrenching drops in value. It’s not wrong to seek stability during the storm.

At Prosperity CRE, the core principals of our real estate investment philosophy are:

  1. Capital Preservation
  2. Provide Ongoing Cash Flow
  3. Build Long Term Wealth

Because our number one investment philosophy is capital preservation, we take a conservative approach towards investing, and seek to minimize investment risks. That’s one of the reasons why we’re investing in apartment complexes. 

Multifamily investment properties not as directly tied to the economic cycle as industrial, retail and office properties. It’s strength and growth are tied more to household growth and long-term demographic trends. So, when the economy dips into a recession, historically, multifamily has been the most resilient property sector. This was confirmed in a recent report by CBRE’s US Multifamily Research Department.

Here are a few takeaways from the CBRE report:

  • Apartment rents declined less than those of office and industrial properties during the 2001 recession and their growth rate was considerably higher post-recession.
  • During the 2008-2009 recession, apartment rents were more resilient than those of office, industrial and retail.

Apartment rents have outperformed other major property sectors during and after the 2008-2009 recession in three ways: The sector experienced the lowest level of rent decline, the fastest recovery to pre-recession peaks and the longest post-recession period of rent growth (see chart below).

The full CBRE report can be viewed HERE.