Commentary: 4 attractive investment opportunities during a recession

Concerns about a possible economic recession are on the minds of many investors given 2019's inverted yield curve, a deteriorating global growth outlook, and other political and economic factors.

But fear of an economic slowdown can overshadow the reality that recessions are not only natural — they're healthy. In fact, they create several investment opportunities for those who are open to them.

Recessions are, essentially, a chance for the economy to let off steam, and prices that are unsustainably high to go down, thus resetting the market. But the real danger of a recession comes when investors overgeneralize and start overreacting because they think there are no longer any good investments. Investors whose outlook is focused, instead, on value, cost basis, time and innovation will weather the storm. Being willing to set a basis at the right price and be patient leads to stronger, more impactful deals.

As an example of this mindset change in the real world, investors are currently shying away from putting money into suburban office space. Labeling these offices as an asset class they don't want to invest in causes them to miss attractive opportunities as a byproduct of trying to avoid those that are bad. Like many things in life, change — like a recession — can often set the stage for opportunity.

Rather than assuming it's a bad time to buy when the market is down, view it as a way to take advantage of investment opportunities you otherwise might not have had. The following four areas could open doors to investment growth and success:

With a recession potentially on the horizon in the coming months or years, corporations will likely transfer liability off their balance sheets and get out of their owned assets. Doing this will free up cash and secure that money for operations, opening the door for investors to acquire or develop ownership opportunities with these major companies.

Even though it's early, there are and will continue to be distressed debt acquisition opportunities. Though it's expected that interest rates will hold steady through 2020, when a recession eventually hits, banks will label certain asset classes as distressed, with loans coming due. And since those loans will have been underwritten at historic highs, banks won't be able to refinance them and lenders will be required by federal law to shed them, ultimately creating investment opportunities in debt.

A recession will likely trigger a rethinking of what retail could and should be, which gives investors the opportunity to buy and reposition physical retail locations. There will always be a place for brick-and-mortar stores; they draw customers who want to look at and feel the products they're buying. However, retailers increasingly do business through online shopping. As this trend continues to transform business, industrial space will have greater demand as it becomes the place to store more retail products, posing another lucrative investment opportunity.

Though an economic recession can negatively impact values of many real estate asset classes, there are some that may be more "recession resistant" than others. Consider senior care, where occupants can't wait for an economy to recover, or data centers, with their significant growth expectations due to the ever-growing demand for data storage and usage.

The moral of the story is this: A recession is not all bad for those with the right perspective. Some of the best deals I've ever been part of happened during a slow economy. Just like with a road trip, it's not about speed but, instead, about the destination. Develop an opportunity-rich mindset, and you'll find that there's always an opportunity for a deal ahead if you're willing to look for it.

Brian Watson is the founder and CEO of Northstar Commercial Partners, Denver. This content represents the views of the author. It was submitted and edited under Pensions & Investments guidelines, but is not a product of P&I's editorial team.