Commercial real estate investors fear inflation despite growth

However, threats to the short-term outlook from inflation, construction costs and rising interest rates were now causing investors to revise their profit expectations, just as the market was witnessing robust growth in multifamily and industrial and reporting a continued recovery in office, retail, and hospitality.

Tina Lichens (pictured), chief operating officer at LightBox who conducted and compiled the report, said her biggest surprise compiling the study was the “frenzy of activity” in the market, even when compared to 2019, which she described as a benchmark year.

“We’ve never seen this kind of activity in terms of properties coming on to the market. It’s insane. And it’s all asset classes all across the US,” she said.

Asked why the sector was so buoyant, she said: “There are always going to be opportunities. Our debt professionals and mortgage broker clients are telling us that because there’s so much liquidity in the market, there are many more debt funds out there and more financing options than ever before.”

Despite the evident growth, doubts were now emerging inside the CRE space in response to inflationary pressures, with experts foreseeing lower profit margins compared to last year. The report also noted that despite the fact there was significant capital allocated to the CRE sector, there was limited availability of assets in certain sub sectors, such as industrial.