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2021 Year-in-Review: CRE’s 11 Most Important Stories WMRE Staff Dec 29, 2021

Inflation accelerated at its fastest pace since 1982 in November, continuing a dismaying trend. The consumer price index, which measures the cost of a wide-ranging basket of goods and services, rose 0.8 percent for the month and on a 6.8 percent annual pace. Excluding food and energy prices, core CPI rose 0.5 percent for the month and 4.9 percent from 12 months ago.

The recent tick up has put renewed focus on the time-tested thesis that commercial real estate provides a useful hedge during inflationary periods. Sales of properties remained strong as the year drew to a close, in part fueled by investors seeking a safe haven. Some multifamily investors have signaled they intend to extend hold periods in part because of the changing investment climate.

Meanwhile, recent research from Nareit showed how REITs have fared in previous inflationary periods, making the case for continued investment in the sector. That complemented recent research from Berkadia, which showed real estate investments are good bets when inflation is high. Inflation also came up during some of the sessions at our second WMRE Forum of the year.

But not all real estate investments may fare the same amid inflation. Specifically, net lease retail properties tend to have very long leases so there is a risk that rental rates may not keep up with the pace of inflation.

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