Commercial real estate is a diverse and ever-evolving industry, and certain asset classes tend to perform better in a recession than others. In this blog post, we will take a closer look at four asset classes that have proven to be particularly resilient during economic downturns: life science use buildings, medical offices, self storage, and industrial manufacturing space.
Life Science Use Buildings: The COVID-19 pandemic has brought attention to the importance of life science research and development. The global market for life science use buildings reached $10.31 billion in 2020, and is projected to continue growing in the coming years. These buildings are typically used for research and development, manufacturing, and storage of pharmaceuticals, biotechnology, and medical devices. They are often equipped with specialized laboratory facilities and equipment, making them highly sought after by companies in the life science industry. Additionally, they are often leased to long-term tenants, providing a stable stream of income for investors.
Medical Offices: The need for out-patient care in the United States has been on the rise for several years, and this trend has only accelerated during the pandemic. The medical office sector has proven to be relatively resilient during economic downturns, as people will always need medical care, regardless of the state of the economy. Additionally, medical office buildings are often leased to long-term tenants, providing a stable stream of income for investors.
Self-Storage: The self-storage asset class has a history of performing well during economic downturns. The Great Recession of 2008-2009 saw the average return for self-storage investments increase by 5%. This is because self-storage facilities provide a necessary service for individuals and businesses who need extra space to store their belongings. Additionally, self-storage facilities are relatively low-maintenance, and they tend to be leased to a large number of short-term tenants, providing a diversified income stream for investors.
Industrial Manufacturing Space: The manufacturing of semiconductors is an essential industry that is expected to continue growing in the coming years. Industrial manufacturing space is in high demand for companies that produce semiconductors, and other high-tech products. These buildings are often equipped with specialized infrastructure, such as clean rooms, and power and data centers, making them highly sought after by companies in the technology industry. Additionally, industrial manufacturing space is typically leased to long-term tenants, providing a stable stream of income for investors.
In conclusion, these four asset classes in commercial real estate have proven to be relatively recession-proof. Life science use buildings, medical offices, self-storage, and industrial manufacturing space are all in high demand and are expected to continue growing in the coming years. They are all relatively low-maintenance assets and are often leased to long-term tenants, providing a stable stream of income for investors.