The depth of a potential recession

The odds of a recession are elevated but below 50% as of May 2025, according to J.P. Morgan Research, with Moody’s clocking the odds of a recession between 50% and 60%.

“While current conditions are OK and still consistent with slow growth, there is increased caution around the outlook,” Chambless said. “It’s not clear whether we are treading through a soft patch or in the initial stages of a downturn.” 

A recession’s depth is key. Most anticipate an economic downturn would be mild. “That doesn’t mean a severe recession isn’t possible,” LaSalvia said. “There’s a case in which there’s little progress made on tariffs, the stock market falls further and the U.S. loses its spot as the global bank. In this scenario, Treasurys are no longer considered a safe haven, causing long-term interest rates to rise at the same time economic activity slows.” 

“A lot depends on how quickly the markets can get clarity around trade agreements, and the extent to which inflation and supply chains are disrupted,” Chambless said.

The impact of a recession on commercial real estate

“It’s possible all sectors of commercial real estate could experience some softer demand if there’s a recession,” Chambless said. “But multifamily and industrial would likely feel less of an impact given cyclical tailwinds, including still-challenged housing affordability and lack of supply.”

Different properties have different considerations should the U.S. enter a recession. 

Multifamily properties

Many would-be single-family homeowners are opting to rent, driving up demand for multifamily properties. The inventory of unsold existing homes jumped 9% from the previous month to 1.45 million at the end of April, or the equivalent of 4.4 months’ supply at the current monthly sales pace, according to the National Association of Realtors. 

“Multifamily is resilient from a cash flow and investment perspective, particularly when you take the long-term view,” said Kurt Stuart, Co-Head of Commercial Term Lending at Chase. "Investors that have local expertise are likely to see buying opportunities." 

“The greatest challenges are the unknowns,” he said. That includes the size of local government budgets, energy and renovation costs, and immigration policy impacts on the labor force. 

Affordable housing

“Workforce and affordable housing are entering this period without the large supply-side problems of their higher-end counterparts. Vacancy rates for these subtypes are hovering around 3%, with some markets at full occupancy,” LaSalvia said. “In a recession, household formation and wage growth will likely suffer, causing some demand stress.” 

“Economic downturns tend to not only increase the need for affordable housing, but bring a renewed focus to increasing the supply,” said Vince Toye, Head of Community Development Banking and Agency Lending for J.P. Morgan.

Nonetheless, the possibility of a recession raises concerns. 

Industrial properties

The ongoing demand to get products in consumers’ hands as quickly as possible means the industrial asset class has continued to perform well. But in a recession, industrial properties associated with elastic goods may feel the effects of reduced consumer spending. 

“Because so much of the distribution space depends on what happens with imports and exports and the demand for goods, there’s some uncertainty about industrial,” Stuart said.

LaSalvia agreed, noting that warehouses near population centers may fare better than those focused on the larger logistics network.

Retail properties

The impact of a recession would likely vary based on the type of retail offered. 

Neighborhood retail centers—particularly those anchored by grocery stores—in densely populated areas continue to perform well. Al Brooks, Vice Chair of Commercial Banking at J.P. Morgan, noted that fast fashion sells during difficult periods, as does high-end retail. 

“It’s the department stores and retailers targeting the middle and working class that would suffer during a recession,” Brooks said. 

“While e-commerce will continue to drive demand, it’s just a small portion of retail,” Brooks said. “Brick-and-mortar retail is still relevant for the foreseeable future.”

Office buildings

Offices are also evolving as employers try to find the best balance of in-person, hybrid and remote work.

Class-A office buildings, which offer a breadth of amenities, continue to perform well with limited vacancies. But in a recession, employers may look to B and C properties as an opportunity to save.

“Should an economic downturn occur, some companies may pull back on expansion, reducing the demand for space,” Stuart said. “Depending on the industry, employers may also look to reduce their overall footprint.”