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How To Make Sure A Recession Doesn’t Take You On A Roller Coaster Ride

25 May 2018

It’s the economy, stupid. That famed catchphrase from President Bill Clinton’s 1992 campaign tells us exactly what we need to know about economic forecasting for 2018 and beyond.

Clinton used the recession of the early 1990s as a central talking point in his successful bid to unseat President George H.W. Bush. But by Election Day in November 1992, the American economy had actually already recovered. For Bush, it was too late. But today’s investors don’t need to be caught off guard and can take a useful lesson from the 1992 election—that changes in the market occur gradually, and the economy might be in the midst of a downturn or upswing long before you realize it.

It’s akin to taking your first ride on any particular roller coaster: you don’t know when the twists, turns, and drops are coming. Similarly, as the average investor, you aren’t necessarily privy to trustworthy, real-time information about the economy. The fluctuating daily stock prices don’t provide a full picture; instead, you’re left to analyze comps of real estate deals that were reached months ago, in an effort to gain some modicum of insight into the present and future.

Currently, we might very well be at the peak of an economic cycle and headed straight for a downturn, and you’d have no idea about it—just like the deceiving moments of calm before a steep drop on a roller coaster. But you don’t need to take this thrill ride without a seat belt. In order to evaluate market changes in real time, our firm constantly seeks information from real estate brokers who serve as an excellent resource on precisely what’s going on with the economy and how the market is shifting. With a seasoned broker’s guidance, you can determine today if a recession is on the horizon or is already in process.

In addition to grass roots intel from brokers, here are just a few key indicators of a depreciating market:

  • Sales volume is declining which indicates there is disintermediation between Buyers and Sellers;
  • Rates of new construction are decreasing;
  • Fewer offers are being made on properties;
  • Exchange Buyers make up an increasing share of the Buyer pool; and
  • REITS, often times the most economically sophisticated players in the market, are selling;

The information you need as an investor is all readily available on the frontline and at the grassroots level, in your broker’s capable hands. It is vital to speak with the professionals on the ground who are directly involved with real estate transactions. They’re doing the hard work by pounding the pavement, and all you need to do is pick up the phone and ask a few questions!

With advice from a knowledgeable broker, you can get out ahead of a recession and make informed investment decisions in real time. Personal finance doesn’t need to be like a roller coaster. It can be a calm trolley ride.

About the Author: Jason Schirn
As HPP’s Chief Investment Officer, Jason Schirn is responsible for HPP’s acquisition program in which the firm seeks to acquire approximately 1 million square feet of industrial real estate annually. Since 2010, Jason has played an instrumental role in the acquisition of more than 45 properties totaling over 4 million rentable square feet.