Student housing andmultifamily are both considered recession-resistant asset classes.The reasoning is simple: even in a down market, people still need aplace to live and students still go to college. While multifamilyhas been favored, student housing may actually perform better in adown cycle, according to Frederick W. Pierce, IV,of Pierce Education Properties.

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“While more students pursue an education during a down cycle anddemand for student housing expands accordingly, multifamilyoccupancies and rents are highly correlated to the economy,”Pierce, president and CEO of Pierce Education Properties, tellsGlobeSt.com. “When unemployment increases, renters become moreprice sensitive.  Those who are laid off often double upin housing with friends and family. Generally, none of thosefactors impact students and their demand for housing.”

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While multifamily is resistant to a downturn, it is certainlystill affected by economic changes. Even in the mildest downturn,rents are stalled of fall. “Those who retain jobs, but do not getpay raises or even get salary cuts, have to tighten their belts andcan't pay higher rents,” says Pierce.

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Student housing, on the other hand, is less volatile during adownturn. Pierce says that students, general, do not defermatriculation in a recession, many prolong their education by goingto graduate school when graduating during a recession and manylaid-off employees return to school during a recession for moreeducation or job-training. “All of those factors create anenvironment where university enrollments actually grow fasterduring economic downcycles,” adds Pierce. “That creates stabilityin the student-housing sector during down cycles.”

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These nuisances could soon become realities. Pierce predicts amild recession in the near-term, and he says that otherprofessionals are anticipating one as well. “Historically, the mostaccurate leading indicator of an economic recession is an invertedyield curve,” he says. Currently, the yield curve is either flat,at 90-day LIBOR, or inverted, at one year LIBOR.”

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An inverted yield curve isn't the only reason that Pierce ispredicting a recession. Like other experts, he is concerned aboutthe length of the cycle and rising interesting rates. “The factthat we are in the longest period of expansion since the end ofWorld War II, which must come to an end at some point, the negativeimpact that recent increases in interest rates have had in manysectors, the degree of volatility in the equity markets and theunpredictable political climate all point towards the eminency of arecession,” he says.

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Finally, geo-political concerns are also putting pressure oneconomic growth and breeding instability. “The China-US situationis about much more than tariffs and I don't believe will bestabilized simply by reaching a compromise about tariffs,” saysPeirce. “That instability will continue to disrupt the globaleconomy and will require the US and the world to become lessdependent upon China. That will take time to resolve itself.”

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Kelsi Maree Borland

Kelsi Maree Borland is a freelance journalist and magazine writer based in Los Angeles, California. For more than 5 years, she has extensively reported on the commercial real estate industry, covering major deals across all commercial asset classes, investment strategy and capital markets trends, market commentary, economic trends and new technologies disrupting and revolutionizing the industry. Her work appears daily on GlobeSt.com and regularly in Real Estate Forum Magazine. As a magazine writer, she covers lifestyle and travel trends. Her work has appeared in Angeleno, Los Angeles Magazine, Travel and Leisure and more.