If you’ve filled up your car, bought groceries, or opened your electric bill lately, you’ve likely noticed the continued increase in prices. That’s because U.S. inflation hit a 31-year high in October. While economists predicted a continued surge, the inflation rate of 6.2% exceeded their forecast of 5.8%. Companies and individuals are concerned with how long this inflationary period will last and what can be done to combat a loss in cash flow.
Investing in commercial real estate may just be the answer, suggests economists.
Commercial real estate rental rates adjust with inflation. Not only are most leases built with a year-to-year escalation clause, averaging 2-5%, they also adjust to increasing costs like other goods and services. Just as a gallon of milk has increased in price, average rental rates have increased.
Property scarcity increases prices over what inflation calls for. The demand for products has caused an increase demand in industrial space, over the already demanded segment of commercial real estate. Additionally, medical commercial real estate has seen an increase in demand over the past two years as the covid pandemic has pushed homeowners to suburban locations. Rental rates for industrial, medical, and other segments of commercial real estate have experienced an increase, right alongside inflation.
There are multiple ways to invest in commercial real estate. From investing in REITs to purchasing commercial property outright, and buying into private equity firms, the options to hedge against inflation are multiple when it comes to commercial real estate. O’Donnell Commercial can help you find and purchase an industrial, medical, office, or retail property that will combat inflation.
In conclusion, we agree with Forbes sentiments, “when investing into an inflationary environment, there is a strong argument to be made for CRE assets as part of a broad inflation hedging strategy.”
Call us today to start your search for investment properties. 630-444-0444.