Inflation vs Commercial Real Estate

The 2022 global inflation prediction by the World Bank is a major concern for income-producing assets, because of its impact on asset's profitability and survival - future cashflow, value preservation and capital gains.

To achieve returns higher than the rate of inflation, commercial real estate investors must adjust their strategies to provide a reasonable control over risks and returns and effectively capture:

1. Growth.

2. Risk-free rate.

3. Market Risk Premium.

4. Cash flow - income growth due to rising rents.

5. Leases - adjusted with market escalations.

6. Scarcity - caused by limited supply and or rising demand.

🎥credit: The Economist

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