Cushman & Wakefield’s David Bitner: If there’s a Recession, It Won’t Be as Bad as 2009

SAN FRANCISCO, CA — Hold tight, stay the course, and enjoy the ride. That may have been the key takeaways from the thoroughly thought-provoking keynote address offered by David Bitner, Head of Americas Capital Markets Research at Cushman & Wakefield at CapRE’s Fourth Annual Northern California Apartment Summit, Analysis of Northern California Apartment Market Demand-Supply, Rental Rates, Absorption of New Product and Investment Sales Volume. And according to Bitner, leading economic indicators all point toward continued momentum. he declared.

Green Lights Go, But What Next?

“I think it’s green lights and go on this expansion over the short to medium term,” he predicted. “What that means as an implication is that in just eight months from now, this will be the longest expansion in US history. And I think it’s almost a certainty that we’re going to get there. and it’s very unclear as to when this cycle will end. But I think that’s a less important question than about, what will the next look like?”

Next, Bitner illustrated that for us. “It’s not going to be a 2009 redux,” he envisaged. “I don’t even think it’ll be a 2001 redux. I think the next recession will be extremely mild. As a couple of mitigators on that, one is that there are newer global imbalances. We don’t have this massive internal problem within the European Union. Not to say that everything is fine in Greece or Italy. But they’re significantly improved. China’s economy is at less of a risk of a real blow-up, as it’s oriented more toward domestic demand sectors rather than relying solely on exports.”

If anything, the trade war will push them more in that direction. “Meanwhile, corporates and households in the U.S. do not have a huge build-up of debt that could cause tremendous instability as it did in the last cycle,” he explained.

Ready, Steady, Go?

“Second, I don’t know about you, but I thought that during this entire expansion, at any given point in time, everyone was slightly terrified that we could go into the next recession within the next year,” he recalled. “You’d turn on the financial news and everyone was asking, Could this be it? Could this be it? Well, it sucks to go through that panic environment, but the upshot is that I don’t think we’ve seen anyone in the economy really get over that.”

In other words, there are fewer imbalances that potentially need to be corrected. “There isn’t a whole ton of development projects of plant expansions or hiring that we need to get liquidated because it was based on un-realistic projections of the future, when we hit the next recession.” Bitner explained. “I’m not saying that there’s none of it. but there’s not enough to make it a prolonged and deep recession.”

Practice Makes Perfect

Next, Bitner looked to the Fed as evidence. “The Federal Reserve has had a lot of practice at this point, working with zero interest rates, using quantitative easing, understanding the advantages and limitations of that process for stimulating economic demand and growth,” he asserted. “So when we go to the next recession, we’ll no longer be in un-chartered waters. Theoretically. There will be a practical, empirical basis for the actions that the Fed takes.”

David Bitner, Managing Director, Cushman & Wakefield

“The implications of this are as follows – short, shallow recession, followed by massive monetary stimulus that will have an outsized effect on asset prices,” Bitner outlined. “That’s equities, that’s spreads in the credit markets, and that’s on commercial real estate. And this is dovetailed with growing global wealth. Like last time, I think we could have a very discontinuous expansions and recessions across the globe. You could have Asia continuing to grow while the U.S. starts to slow down or Europe keeps going or what have you. That means there will be continued liquidity added somewhere in the world, that can be funneled into real estate.”

Summing it Up

Concluded Bitner, “So what this finally means is that, for any investor in the world who’s sitting around and saying, I’m going to wait until there is a major price correction, and then I’m just going to load capital in so that I can take advantage of the rebounding returns… may not have time to do that. So you’ve got to play the game through. I say that to multi-family audiences, I say that to retail audiences, I say that to every audience, because that is the core reality of the likely return-on-investment environment over the next five years.”


David Bitner with colleagues at CapRE’s Northern California Apartment Summit

David Bitner is Head of Americas Capital Markets Research at Cushman & Wakefield. His research focuses on how macroeconomic trends, real estate fundamentals and dynamics in the broader capital markets interact to shape commercial real estate risks and opportunities for investors. David works closely with Cushman & Wakefield capital markets professionals and clients to further the firm’s goal of promoting thought leadership within the commercial real estate niche. David’s responsibilities include producing capital markets thought leadership content, and directing a program of market presentations, written analysis, surveys, forecasts, and data collection that will support the capital markets business and advance the strategic plan in Americas Research.