Owners sell properties for a variety of reasons— profit, problems, lifestyle changes, estate planning, the ability to capitalize on a better opportunity somewhere else, etc. Since we’ve passed the 10-year mark on a growth cycle that typically lasts between seven and ten years, sellers who are on the fence have been working with us to take strategic approaches to ensure they receive top of the market pricing for their asset.
“Most investors expect to see a significant market correction at some point in the near future— but when?”
While charts and data provide a good indication of where the market has been, the best way to form an opinion of the future is by talking to the people that define the market — buyers and sellers. As one of the most active retail sales teams on the West coast of Florida, few people talk to more buyers and sellers of retail properties than we do. Most investors expect to see a significant market correction at some point in the near future— but when?
Robert Shiller, a Nobel prize-winning economist and one of the few people to predict the last recession, believes that we have a 50 percent chance of entering a recession in the next 18 months. Many of the investors we speak to on a regular basis have echoed this sentiment, with the majority expecting approximately 18 to 24 more months of growth before a slowdown. According to the Wall Street Journal, approximately 25 percent of economists expect to enter a recession in 2019, with over 50 percent expecting one before the end of 2020.
“One of the causes of the next recession is likely to be stagnant wage growth.”
Very few investors expect the next recession to be as significant as the last one. Many experts expect the next recession will be unlike any in recent history. The last two recessions were largely caused by overvalued assets (mortgage backed securities and software stocks, specifically). While we’ve recently been seeing retail assets trade for aggressive prices, many economists think the next recession is likely to be caused by something else.
Josh Bivens, Director of Research for the Economic Policy Institute, predicts that one of the causes of the next recession is likely to be stagnant wage growth. While the unemployment rate fell below 4 percent in February, most low- and middle-income households have experienced very slow wage growth over the course of this growth cycle. Since these households typically spend a much higher portion of their income than wealthier households, any sudden dent in their incomes could quickly hurt the businesses they patronize. These businesses would be forced to make cutbacks, which could include layoffs, potentially triggering a cycle that could have an impact on the overall economy.
While such a scenario is possible, no one has a crystal ball that can predict the future. We can’t be completely sure when the next recession will come or what it will look like. For this reason, many owners have opted to work with us to take a proactive approach at ensuring they receive top of the market pricing if they’re considering a sale, and are in a strong position to maintain positive cash flow if they plan to hold. Everyone’s situation is unique, so feel free to reach out to our team to review your situation in detail.
Written by Michael Mohammed, an Investment Advisor specializing in shopping centers for Medefind Retail.