CRE property values are likely to slump as economic growth slows and bond yields rise, according to a new analysis from Cushman & Wakefield, which pegs the average decline if a "mild" recession happens to clock in at around 20% over the next two years and range between 4% and 23% depending on property type.

But despite that, "without question, certain segments of the market will thrive over the next few years, easily outperforming our national forecasts," Cushman's Kevin Thorpe, Rebecca Rockey, James Bohnaker, and Rob Miller note.  But "we can't emphasize enough that all real estate is intensely local.," they say. "Not every product type or geography will follow the national glide path. Even within each asset class, a large portion will likely outperform our forecasts, and some will likely underperform. Within that volatility lies the opportunity."

Cushman experts modeled four possible scenarios around the likelihood of a recession.  The first "soft landing" scenario, which is pegged at a 30% probability, would see the Fed successfully recalibrate the economy without triggering a recession.  GDP would then slow to around 2% this year and next.  The second scenario, upside growth, has a 5% shot of materializing and would require supply chain issues and the Russia-Ukraine conflict to quickly resolve.  Scenario 3, the "mild recession" model, is the one Cushman experts say is most likely to transpire (a 50% chance) and involves the Russian invasion of Ukraine continuing, resulting in a larger loss of oil supply and higher prices, and high inflation cutting into disposable income. This would see a recession by late 2022 or early 2023, but the underlying strength of consumers and business would keep the recession short and shallow.