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The Recession, The Rebound and The Result

We've all been inundated with news about current inflationary trends. Sunday's Wall Street Journal article on the subject is just the latest of many. In fact, WSJ.com now has an entire section dedicated to articles on inflation:

A sampling of WSJ.com's articles on inflation.

The premise: the economy is experiencing a post-COVID demand surge in tandem with a bottleneck of supply, and prices are going up. Indeed consumer prices (excluding food and energy) have increased 2% in the last three months and this equals an annualized number of 8.2%. The Fed calls this burst of inflation "transitory."

Price indices have been on an upward trajectory since June 2020. Chart cred: Costar Group.

BisNow recently published a great article on the affects of inflation on the commercial real estate market. The argument for investing in real estate during an inflationary period: "hard assets" like real estate will appreciate largely in tandem with the rate of inflation, so your wealth will not be worth less as a result of the inflationary period. Moreover, inflation leads to higher rents that landlords can demand from tenants. The counterargument: inflation raises interest rates and raises construction prices (which have gone up 13% in the last year - and don't get us started about the cost of lumber - yikes!).

Log cabins: the new luxury status symbol. Photo cred: Osterhout Log Cabin (Wikipedia)

Our takeaways: it may be a good time to make your next commercial real estate acquisition while interest rates are still at historic lows. We can attest to the robust interest in commercial real estate acquisitions across asset types and markets nationwide, so be prepared to move quickly. Focus on assets where both long-term debt is available and long-term lease rates are tied to the CPI or where short term leases will allow you to renegotiate rates to market rents in the short term.

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The Recession, The Rebound and The Result

We've all been inundated with news about current inflationary trends. Sunday's Wall Street Journal article on the subject is just the latest of many. In fact, WSJ.com now has an entire section dedicated to articles on inflation:

A sampling of WSJ.com's articles on inflation.

The premise: the economy is experiencing a post-COVID demand surge in tandem with a bottleneck of supply, and prices are going up. Indeed consumer prices (excluding food and energy) have increased 2% in the last three months and this equals an annualized number of 8.2%. The Fed calls this burst of inflation "transitory."

Price indices have been on an upward trajectory since June 2020. Chart cred: Costar Group.

BisNow recently published a great article on the affects of inflation on the commercial real estate market. The argument for investing in real estate during an inflationary period: "hard assets" like real estate will appreciate largely in tandem with the rate of inflation, so your wealth will not be worth less as a result of the inflationary period. Moreover, inflation leads to higher rents that landlords can demand from tenants. The counterargument: inflation raises interest rates and raises construction prices (which have gone up 13% in the last year - and don't get us started about the cost of lumber - yikes!).

Log cabins: the new luxury status symbol. Photo cred: Osterhout Log Cabin (Wikipedia)

Our takeaways: it may be a good time to make your next commercial real estate acquisition while interest rates are still at historic lows. We can attest to the robust interest in commercial real estate acquisitions across asset types and markets nationwide, so be prepared to move quickly. Focus on assets where both long-term debt is available and long-term lease rates are tied to the CPI or where short term leases will allow you to renegotiate rates to market rents in the short term.

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