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The prospect of a contentious presidential race looms as the calendar flips to 2020. What’s more, the uncertainty of an election year often leads to a dip in the economy. Although most people I’ve spoken with feel good about the current dynamics of the financial system, there are already concerns about what lies ahead in the next 12 to 24 months.
But a season of downturn shouldn’t be viewed in a strictly negative context. One of the biggest consequences of the 2008 Great Recession was the way the market deterioration distorted the definition of “recession” entirely. What we saw a decade ago wasn’t a typical recession; it was a once-in-a-generation anomaly.
Keeping that in mind, it’s time for a transformation in the way commercial real estate investors think about recessions and their impact on opportunity, commerce and entrepreneurship.
Opportunity In The Slowdowns
Some of the best deals I’ve been a part of have come during a downturn. Even during the Great Recession, I was able to purchase every former Albertsons grocery store in Colorado for less than 10% of their replacement cost value. I wasn’t concerned about market conditions; it was the specifics of the deal that caught my attention. And that’s a pretty good lesson to remember: No matter the instability or changes, there’s always a deal to be discovered.
It’s understandable to be a little bit wary of a potential recession in the coming years, but by no means are all industries doomed to fail. I believe the following three real estate ventures are sure to still stand tall through an economic downturn:
1. Data Centers
The market for data centers in the United States continues to grow, with revenues projected to exceed $69 billion by 2024. Just think about all the massive advancements the country is making in things like 5G and automation, and consider the emerging technology it takes to build these tools and networks. That technology needs a host site, which makes data centers recession-resistant.
At my company, we recently hired someone whose sole responsibility is to grow our footprint in the data center space. We are approaching a billion dollars on building data centers from the ground up in the past 18 months, and we plan to double that investment in the next year. Because people and businesses need to store ever-increasing amounts of data, data centers represent a real estate opportunity that’s here to stay.
2. Industrial Warehouses
You might be thinking: “Industrial warehouses? Don’t they just sit unused during a recession?” Believe it or not, the answer is no — particularly when it comes to last-mile industrial centers in and around cities in need of distribution services. These sites can be built in approximately six to eight months, allowing them to keep up with demand at a strong pace.
I’ve seen a major shift in the industrial real estate market in recent years in terms of the size and scope of buildings. Everyone is trying to keep up with the big players these days, and the need to have bigger buildings with the capacity to meet the demands of the e-commerce boom is something that should solidly withstand a market downturn.
3. Senior Care
Recession or not, there will always be people in need of high-quality care. Whether they need the services of memory care homes or assisted living facilities, having spaces for those services is critical. People can’t usually wait until the market improves to have high-quality care for their loved ones. When there are people in need, no one can afford to stall.
In many cases, the people who need care facilities the most have health plans and other resources available to help pay for them, making the senior care industry more immune to market downturns. Even though medical technology continues to advance, the human body doesn’t. And while some technologies can help people age at home, they also have limits. Physical spaces for senior care will always be important.
Recessions are a natural part of every investment cycle, so real estate investors shouldn’t view these events as the end of the world. By shifting focus to areas that will withstand the worst effects of a recession, investors can find new opportunities to maximize. Even with a market that could be due for a downturn, there are industries poised to thrive. Focusing on those areas now can help insulate your investment diversification, even as the winds of change start to shift.