How High-Interest Rates Affect Commercial Real Estate React News is a wholly owned subsidiary of Green Street Advisors (UK) Ltd. Green Streets global news publications are not a product of the regulated advisory business. All Property CPPI weights: retail (20%), office (17.5%), apartment (15%), health care (15%), industrial (10%), lodging (7.5%), net lease (5%), self-storage (5%), manufactured home park (2.5%), and student housing (2.5%). MIM LLC exempt from the requirement to hold an Australian financial services license under the Act in respect of the financial services it provides to Australian clients. In the U.S. rising interest rates continue to sink deals. Commercial real estate (i.e. According to economic forecasters, the United States is at risk of sliding into a recession next year as the Federal Reserve pushes interest rates higher to tackle stubborn inflation. 1 Guy: Ha ha, thanks for that, but perhaps we should also go through the components. To start the commercial, we wanted to hit on the pain point at the forefront of every real estate professional's mind: the high interest rates. Guy: Geo-political tensions, inflation and wage pressures have also shifted the real estate landscape. If the cap rate on our real estate were to increase from 6% to 8% to reflect higher interest rates in the above example, the value of the real estate would actually decline by 25%. The underlying assumptions and these views are subject to change based on market and other conditions and may differ from other portfolio managers or of the firm as a whole. MIAL is licensed by the Securities and Futures Commission for Type 1 (dealing in securities), Type 4 (advising on securities) and Type 9 (asset management) regulated activities. The Fed anticipates more increases into 2023. Transactions in the second half are likely to continue the cooling trend as buyers pull out of deals either because of higher borrowing costs or to hold off in case property prices fall as valuations catch up with changing market dynamics. Commercial Real Estate During a Period of Inflation Commercial Real Estate Prices for United States But the impact will be highly differentiated by the varying demand for space in particular markets. They also offer decent rates of growth, often around 8-12%. Why Do Real Interest Rates Matter for Real Estate? | CBRE This material is intended solely for Institutional Investors, Qualified Investors and Professional Investors. This document is only intended for, and may only be distributed to, investors in the UK and EEA who qualify as a professional client as defined under the Markets in Financial Instruments Directive (2014/65/EU), as implemented in the relevant EEA jurisdiction, and the retained EU law version of the same in the UK. Given the strong underlying fundamentals for most property types, this relationship will help CRE resist some of the effects of inflation and higher interest rates. The left panel of figure 1 shows all property real total returns plotted together with CPI inflation. Past performance is no guarantee of future return., AN INCOME SOURCE THAT KEEPS PACE WITH INFLATION. The views expressed herein are solely those of MIM and do not necessarily reflect, nor are they necessarily consistent with, the views held by, or the forecasts utilized by, the entities within the MetLife enterprise that provide insurance products, annuities and employee benefit programs. The second half of 2022 will likely be choppy especially with the expectation of several more interest rate hikes. Since REITs own high-quality properties, the index measures the value of institutional-quality commercial real estate. The combination of higher mortgage rates and home prices has caused affordability to crater to its lowest level since the housing crash. Should You Invest In Real Estate During Inflation? For example, Industrial and Office properties each led the way in rent growth in 9 of the 27 years. As calls back to the office increase and new office lease agreements are being inked13.8 million square feet in new large-block transactions were signed last yearthere is a fight for superior real estate to entice workers back to the workplace. Green Street Advisors, LLC is a U.S. limited liability company doing business as Green Street. For instance, industrial real estate and apartment buildings showed that there would be the highest returns in private real estate. It is driven by the fundamental models maintained by the research team, which, in turn, are driven primarily by changes in market cap rates and net rental income. Another way to view the inflation story is to look at rent growth during recent periods of economic expansion, which all had different economic dynamics. Conversely, according to Vigour Times, the Fed today primarily ignores the money supply, which expanded dramatically as the Fed bought bonds to hold down long-term interest rates. And although inflation reached a 7.5% annual rate in January, we currently have a relatively robust market. Trading Economics provides the current actual value, an historical data chart and . Ranging from a single gas station to a huge . I also slightly cringe when referencing the commercial real estate market as a whole, as this combines sectors with strong tailwinds like warehouses against sectors facing headwinds like office. That was almost double 2020's . The index is based on Green Street's frequently updated estimates of price appreciation of the property portfolios owned by the REITs in its U.S. coverage universe. Where MIMEL does not have an applicable cross-border licence, this document is only intended for, and may only be distributed on request to, investors in the EEA who qualify as a professional client as defined under MiFID II, as implemented in the relevant EEA jurisdiction. Before investing, investors should seek their own professional advice. Inflation and Its Impact on Commercial Real Estate - Three33Properties DM Others are still lending but seeking to minimize risk by requiring borrowers to put more cash into deals (lower LTVs). In this article, we delve deeper into inflation and how it relates to the commercial real estate sector. Institutional investors turn to MetLife Investment Management for expertise in Public Fixed Income, Private Capital & Real Estate. However, between the year 2002 011 the inflation rate was only 2.55%. William: We believe that it is. While the firm offers some investment advisory services, the U.S. Research, Data and Analytics products and services are not provided in the capacity of an investment advisor or a fiduciary. Commercial Real Estate Market in India - Mordor Intelligence Commercial real estate can also help you build up your investment portfolio. Also, the economy has been making a bullish comeback due to increased consumer mobility and milder virus variants. Inflation Impact on Commercial Real Estate - PBMares The ten-year break-even inflation rate remains above 200 bps. 70%). If only it was this simple. Commercial real estate (i.e. There are several reasons rental income has held its own against inflation over time. It should be understood that subsequent developments may materially affect the information contained in this document, which none of MIM, its affiliates, advisors or representatives are under an obligation to update, revise or affirm. What Higher Interest Rates and Inflation Mean for Commercial Real Estate In other words, CRE can benefit from the same forces that currently drive inflation. Real estate is a good hedge for inflation. of 8.21% for the 5-, 10- and 20-year periods ending 6/30/21 exceeded what the bond market has delivered, was close behind the 8.61% that stocks have delivered over the 20-year period. The CRE industry does not provide the same level of protection against inflation to all sectors or property types in the industry. I've noticed some experts point. Hyperinflation is a term used when inflation rates exceed 50%. Green Street's Pan-European Real Estate Analytics platform covers 25 of the most liquid European real estate markets across the industrial, office, retail, and residential property sectors. Investment in real estate is speculative and involves significant risk. The U.S. Labor Department's Consumer Price Index climbed 4.2 percent over the last year. : This document is being issued by MetLife Investments Asia Limited (MIAL), a part of MIM, and it has not been reviewed by the Securities and Futures Commission of Hong Kong (SFC). Leadership in rent growth has regularly shifted between 4 key sectors over time. Director, Savills World Research. Here's a run down of inflation's impact on commercial real estate thus far. Privacy Policy and Disclosures - We do not sell consumers' information for monetary value per the California Consumer Privacy Act but may collect personal information from you and use it for specified purposes. This increase in property income, or potential income, has been helping to offset the spring and summer 2022 rise in interest rates. Next, multiply the Index Adjustment Multiplier- +3.55%- against the initial base rent- $20,000 per month. U.S. commercial property prices index 2014-2021 | Statista CPI inflation rose 5.4% year over year in June, the highest level since 1991. What Makes Fractional Ownership Of Commercial Real Estate Investment An Guy: As you mentioned earlier, the pandemic has caused changes to consumer behavior and to work habits. To be more specific it's common to see for every 1% of inflationary increase you can expect to see 1.1% in returns. Commercial real estate is a great way to protect your investments from inflation and maintain your purchasing power. Interest Rates, Inflation, and Real Estate Investments. This analysis is not intended for distribution with Retail Investors. In addition, growing interest rates evoke a double-hedge effect where financing costs become higher, especially in construction, meaning there is less new product on the market. In 1990, inflation reached a high level at 5%, and real total returns declined during the same time. Any or all forward-looking statements, as well as those included in any other material discussed at the presentation, may turn out to be wrong. 6 Reasons for the Surge in Commercial Real Estate - EQUITYMULTIPLE Investors should consider their investment objectives, and it is strongly suggested that the reader seek his or her own independent advice in relation to any investment, financial, legal, tax, accounting or regulatory risks and evaluate their own risk tolerance before investing. The 2023 Commercial Real Estate Outlook: High Inflation, Rising Interest Rates And Opportunity Abound. If these regular increases outpace the rate, the relative return will stay positive. First, prices tend to rise during periods of economic growth, when tenants can afford to spend more and rent increases are easier to negotiate. It is not MIMs intention to provide, and you may not rely on this document as providing, a recommendation with respect to any particular investment strategy or investment. Whats more, inflation is inspiring innovation in the industry, and demand for space greatly outweighs supply; this was not the case in the late 80s, an era of big lending and construction. industrial, office, apartment, retail and hotel properties) offers investors an inflation- resistant source of income as well as the potential for attractive long-term returns. Another positive sign for CRE today is that commercial and multifamily mortgage delinquencies across all sectors have reached pre-pandemic levels. When inflation was high in the past, the equity positions of commercial properties were highly leveraged, with fixed-rate debt acquired at positive spreads. Could you provide an example? Commercial Real Estate Prices for United States - 2022 Data 2023 Marc DeLuca is CEO of KBS, one of the largest investors of premier commercial real estate in the nation. "It's a simple story: higher yields on Treasury bonds equals higher cap rates," said Peter Rothemund, Co-Head of Strategic Research at Green Street. However, this is also an average. According to IBISWorld, the market size of commercial real estate, as measured by revenue, was $992B in 2020. The information in this website is provided "as is" and on an "as available" basis without warranties of any kind. This is an average. In June and July of this year, the Fed raised the interest rate at the fastest pace in forty years: it raised the federal funds rate 75 basis points at each open market committee meetings. That's one of the benefits of an appraisal-based index; we don't have to wait for deals to close. This factor may have the effect of limiting the availability of these investments for purchase and may also limit the ability to sell such investments at their fair market value in response to changes in the economy or the financial markets. William: Similar to a bond, real estate valuations can be influenced by the present-value effect from interest rates. Typically in a commercial lease there are annual escalations that range anywhere from 2% to 3% annually. Those earnings are predicated in large part on ongoing cash flow from contractual rents and leases, which have provided a welcome bulwark against inflation over time. A commercial real estate investment can provide many benefits including cash flow, capital gains, favorable tax treatment, and portfolio diversification, all while serving as a hedge against inflation.Most of these benefits are fairly straightforward, but the last onea hedge against inflationis commonly misunderstood and often overlooked. NOTE: The CRE industry grew steadily from ~$821B in 2011 to $1.16T in 2019, but declined in 2020 due to the impact of the COVID-19 pandemic. Clarion Partners, LLC is a wholly owned subsidiary of Franklin Resources, Inc. All rights reserved. We are not responsible for the content, views, or privacy policies of the third party website. Over the long term, commercial real estate is an asset class that has historically generated predictable cash flow. Any interaction between the news employees and the research staff is monitored by the firm's Compliance Department. So yes, prices are high, but the economic fundamentals are strong. The Advisory and Consulting business unit at Green Street is a state registered investment adviser. What History Teaches Us About Inflation And Commercial Real Estate - Forbes Thankfully, the downside from these delays has been relatively minimal from an IRR/return standpoint. With the November increase, the Fed's benchmark rate is in the range of 3.75 percent to 4 percent. This figure is expected to grow to ~$1T in 2021, which represents a growth rate of ~3.1% annually. To stop the sharing of information, please click here for the "Do Not Sell My Personal Information" page. In practice, however, increases in interest rates has often corresponded with rising inflation, which puts upward pressure on real estate rents and property values. If you are a real estate owner or are planning to diversify your investment portfolio, the rising inflation rate should be a critical point to consider when comparing assets. Forbes Business Council is the foremost growth and networking organization for business owners and leaders. Is commercial real estate really a good inflation hedge? That also makes sense because interest rates are higher, and spreads are wider, but does this mean that, like most fixed income bond, existing positions are underwater? is a consultancy providing information and intelligence on the commercial real estate market. As interest rates find their new equilibrium so will cap rates; commercial real estate performance and valuation will always remain cyclical. Despite emergent geopolitical risks stemming from Russia's invasion of Ukraine, mounting inflation now has the Fed's full attention. Tightened financial conditions, as a result of rising inflation, threaten global growth in the commercial real estate (CRE) sector due to the increased real cost of borrowing. With rising inflation and multiple interest rate increases in 2022, both are hot topics impacting the commercial real estate industry. How a Looming Recession Impacts CRE Deals | ORION INVESTMENT REAL ESTATE Affiliates of MIM may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives) of any company mentioned herein. Akin to familiar stock price indexes (e.g., S&P 500), GDP value weighting provides a gauge of aggregate (as opposed to average) values. Benefits of an appraisal-based index ; we Do n't have to wait for deals to close through the.. 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a propertys operating expenses, since this insulates them from impact of higher utility and maintenance costs. How High-Interest Rates Affect Commercial Real Estate React News is a wholly owned subsidiary of Green Street Advisors (UK) Ltd. Green Streets global news publications are not a product of the regulated advisory business. All Property CPPI weights: retail (20%), office (17.5%), apartment (15%), health care (15%), industrial (10%), lodging (7.5%), net lease (5%), self-storage (5%), manufactured home park (2.5%), and student housing (2.5%). MIM LLC exempt from the requirement to hold an Australian financial services license under the Act in respect of the financial services it provides to Australian clients. In the U.S. rising interest rates continue to sink deals. Commercial real estate (i.e. According to economic forecasters, the United States is at risk of sliding into a recession next year as the Federal Reserve pushes interest rates higher to tackle stubborn inflation. 1 Guy: Ha ha, thanks for that, but perhaps we should also go through the components. To start the commercial, we wanted to hit on the pain point at the forefront of every real estate professional's mind: the high interest rates. Guy: Geo-political tensions, inflation and wage pressures have also shifted the real estate landscape. If the cap rate on our real estate were to increase from 6% to 8% to reflect higher interest rates in the above example, the value of the real estate would actually decline by 25%. The underlying assumptions and these views are subject to change based on market and other conditions and may differ from other portfolio managers or of the firm as a whole. MIAL is licensed by the Securities and Futures Commission for Type 1 (dealing in securities), Type 4 (advising on securities) and Type 9 (asset management) regulated activities. The Fed anticipates more increases into 2023. Transactions in the second half are likely to continue the cooling trend as buyers pull out of deals either because of higher borrowing costs or to hold off in case property prices fall as valuations catch up with changing market dynamics. Commercial Real Estate During a Period of Inflation Commercial Real Estate Prices for United States But the impact will be highly differentiated by the varying demand for space in particular markets. They also offer decent rates of growth, often around 8-12%. Why Do Real Interest Rates Matter for Real Estate? | CBRE This material is intended solely for Institutional Investors, Qualified Investors and Professional Investors. This document is only intended for, and may only be distributed to, investors in the UK and EEA who qualify as a professional client as defined under the Markets in Financial Instruments Directive (2014/65/EU), as implemented in the relevant EEA jurisdiction, and the retained EU law version of the same in the UK. Given the strong underlying fundamentals for most property types, this relationship will help CRE resist some of the effects of inflation and higher interest rates. The left panel of figure 1 shows all property real total returns plotted together with CPI inflation. Past performance is no guarantee of future return., AN INCOME SOURCE THAT KEEPS PACE WITH INFLATION. The views expressed herein are solely those of MIM and do not necessarily reflect, nor are they necessarily consistent with, the views held by, or the forecasts utilized by, the entities within the MetLife enterprise that provide insurance products, annuities and employee benefit programs. The second half of 2022 will likely be choppy especially with the expectation of several more interest rate hikes. Since REITs own high-quality properties, the index measures the value of institutional-quality commercial real estate. The combination of higher mortgage rates and home prices has caused affordability to crater to its lowest level since the housing crash. Should You Invest In Real Estate During Inflation? For example, Industrial and Office properties each led the way in rent growth in 9 of the 27 years. As calls back to the office increase and new office lease agreements are being inked13.8 million square feet in new large-block transactions were signed last yearthere is a fight for superior real estate to entice workers back to the workplace. Green Street Advisors, LLC is a U.S. limited liability company doing business as Green Street. For instance, industrial real estate and apartment buildings showed that there would be the highest returns in private real estate. It is driven by the fundamental models maintained by the research team, which, in turn, are driven primarily by changes in market cap rates and net rental income. Another way to view the inflation story is to look at rent growth during recent periods of economic expansion, which all had different economic dynamics. Conversely, according to Vigour Times, the Fed today primarily ignores the money supply, which expanded dramatically as the Fed bought bonds to hold down long-term interest rates. And although inflation reached a 7.5% annual rate in January, we currently have a relatively robust market. Trading Economics provides the current actual value, an historical data chart and . Ranging from a single gas station to a huge . I also slightly cringe when referencing the commercial real estate market as a whole, as this combines sectors with strong tailwinds like warehouses against sectors facing headwinds like office. That was almost double 2020's . The index is based on Green Street's frequently updated estimates of price appreciation of the property portfolios owned by the REITs in its U.S. coverage universe. Where MIMEL does not have an applicable cross-border licence, this document is only intended for, and may only be distributed on request to, investors in the EEA who qualify as a professional client as defined under MiFID II, as implemented in the relevant EEA jurisdiction. Before investing, investors should seek their own professional advice. Inflation and Its Impact on Commercial Real Estate - Three33Properties DM Others are still lending but seeking to minimize risk by requiring borrowers to put more cash into deals (lower LTVs). In this article, we delve deeper into inflation and how it relates to the commercial real estate sector. Institutional investors turn to MetLife Investment Management for expertise in Public Fixed Income, Private Capital & Real Estate. However, between the year 2002 011 the inflation rate was only 2.55%. William: We believe that it is. While the firm offers some investment advisory services, the U.S. Research, Data and Analytics products and services are not provided in the capacity of an investment advisor or a fiduciary. Commercial Real Estate Market in India - Mordor Intelligence Commercial real estate can also help you build up your investment portfolio. Also, the economy has been making a bullish comeback due to increased consumer mobility and milder virus variants. Inflation Impact on Commercial Real Estate - PBMares The ten-year break-even inflation rate remains above 200 bps. 70%). If only it was this simple. Commercial real estate (i.e. There are several reasons rental income has held its own against inflation over time. It should be understood that subsequent developments may materially affect the information contained in this document, which none of MIM, its affiliates, advisors or representatives are under an obligation to update, revise or affirm. What Higher Interest Rates and Inflation Mean for Commercial Real Estate In other words, CRE can benefit from the same forces that currently drive inflation. Real estate is a good hedge for inflation. of 8.21% for the 5-, 10- and 20-year periods ending 6/30/21 exceeded what the bond market has delivered, was close behind the 8.61% that stocks have delivered over the 20-year period. The CRE industry does not provide the same level of protection against inflation to all sectors or property types in the industry. I've noticed some experts point. Hyperinflation is a term used when inflation rates exceed 50%. Green Street's Pan-European Real Estate Analytics platform covers 25 of the most liquid European real estate markets across the industrial, office, retail, and residential property sectors. Investment in real estate is speculative and involves significant risk. The U.S. Labor Department's Consumer Price Index climbed 4.2 percent over the last year. : This document is being issued by MetLife Investments Asia Limited (MIAL), a part of MIM, and it has not been reviewed by the Securities and Futures Commission of Hong Kong (SFC). Leadership in rent growth has regularly shifted between 4 key sectors over time. Director, Savills World Research. Here's a run down of inflation's impact on commercial real estate thus far. Privacy Policy and Disclosures - We do not sell consumers' information for monetary value per the California Consumer Privacy Act but may collect personal information from you and use it for specified purposes. This increase in property income, or potential income, has been helping to offset the spring and summer 2022 rise in interest rates. Next, multiply the Index Adjustment Multiplier- +3.55%- against the initial base rent- $20,000 per month. U.S. commercial property prices index 2014-2021 | Statista CPI inflation rose 5.4% year over year in June, the highest level since 1991. What Makes Fractional Ownership Of Commercial Real Estate Investment An Guy: As you mentioned earlier, the pandemic has caused changes to consumer behavior and to work habits. To be more specific it's common to see for every 1% of inflationary increase you can expect to see 1.1% in returns. Commercial real estate is a great way to protect your investments from inflation and maintain your purchasing power. Interest Rates, Inflation, and Real Estate Investments. This analysis is not intended for distribution with Retail Investors. In addition, growing interest rates evoke a double-hedge effect where financing costs become higher, especially in construction, meaning there is less new product on the market. In 1990, inflation reached a high level at 5%, and real total returns declined during the same time. Any or all forward-looking statements, as well as those included in any other material discussed at the presentation, may turn out to be wrong. 6 Reasons for the Surge in Commercial Real Estate - EQUITYMULTIPLE Investors should consider their investment objectives, and it is strongly suggested that the reader seek his or her own independent advice in relation to any investment, financial, legal, tax, accounting or regulatory risks and evaluate their own risk tolerance before investing. The 2023 Commercial Real Estate Outlook: High Inflation, Rising Interest Rates And Opportunity Abound. If these regular increases outpace the rate, the relative return will stay positive. First, prices tend to rise during periods of economic growth, when tenants can afford to spend more and rent increases are easier to negotiate. It is not MIMs intention to provide, and you may not rely on this document as providing, a recommendation with respect to any particular investment strategy or investment. Whats more, inflation is inspiring innovation in the industry, and demand for space greatly outweighs supply; this was not the case in the late 80s, an era of big lending and construction. industrial, office, apartment, retail and hotel properties) offers investors an inflation- resistant source of income as well as the potential for attractive long-term returns. Another positive sign for CRE today is that commercial and multifamily mortgage delinquencies across all sectors have reached pre-pandemic levels. When inflation was high in the past, the equity positions of commercial properties were highly leveraged, with fixed-rate debt acquired at positive spreads. Could you provide an example? Commercial Real Estate Prices for United States - 2022 Data 2023 Marc DeLuca is CEO of KBS, one of the largest investors of premier commercial real estate in the nation. "It's a simple story: higher yields on Treasury bonds equals higher cap rates," said Peter Rothemund, Co-Head of Strategic Research at Green Street. However, this is also an average. According to IBISWorld, the market size of commercial real estate, as measured by revenue, was $992B in 2020. The information in this website is provided "as is" and on an "as available" basis without warranties of any kind. This is an average. In June and July of this year, the Fed raised the interest rate at the fastest pace in forty years: it raised the federal funds rate 75 basis points at each open market committee meetings. That's one of the benefits of an appraisal-based index; we don't have to wait for deals to close. This factor may have the effect of limiting the availability of these investments for purchase and may also limit the ability to sell such investments at their fair market value in response to changes in the economy or the financial markets. William: Similar to a bond, real estate valuations can be influenced by the present-value effect from interest rates. Typically in a commercial lease there are annual escalations that range anywhere from 2% to 3% annually. Those earnings are predicated in large part on ongoing cash flow from contractual rents and leases, which have provided a welcome bulwark against inflation over time. A commercial real estate investment can provide many benefits including cash flow, capital gains, favorable tax treatment, and portfolio diversification, all while serving as a hedge against inflation.Most of these benefits are fairly straightforward, but the last onea hedge against inflationis commonly misunderstood and often overlooked. NOTE: The CRE industry grew steadily from ~$821B in 2011 to $1.16T in 2019, but declined in 2020 due to the impact of the COVID-19 pandemic. Clarion Partners, LLC is a wholly owned subsidiary of Franklin Resources, Inc. All rights reserved. We are not responsible for the content, views, or privacy policies of the third party website. Over the long term, commercial real estate is an asset class that has historically generated predictable cash flow. Any interaction between the news employees and the research staff is monitored by the firm's Compliance Department. So yes, prices are high, but the economic fundamentals are strong. The Advisory and Consulting business unit at Green Street is a state registered investment adviser. What History Teaches Us About Inflation And Commercial Real Estate - Forbes Thankfully, the downside from these delays has been relatively minimal from an IRR/return standpoint. With the November increase, the Fed's benchmark rate is in the range of 3.75 percent to 4 percent. This figure is expected to grow to ~$1T in 2021, which represents a growth rate of ~3.1% annually. To stop the sharing of information, please click here for the "Do Not Sell My Personal Information" page. In practice, however, increases in interest rates has often corresponded with rising inflation, which puts upward pressure on real estate rents and property values. If you are a real estate owner or are planning to diversify your investment portfolio, the rising inflation rate should be a critical point to consider when comparing assets. Forbes Business Council is the foremost growth and networking organization for business owners and leaders. Is commercial real estate really a good inflation hedge? That also makes sense because interest rates are higher, and spreads are wider, but does this mean that, like most fixed income bond, existing positions are underwater? is a consultancy providing information and intelligence on the commercial real estate market. As interest rates find their new equilibrium so will cap rates; commercial real estate performance and valuation will always remain cyclical. Despite emergent geopolitical risks stemming from Russia's invasion of Ukraine, mounting inflation now has the Fed's full attention. Tightened financial conditions, as a result of rising inflation, threaten global growth in the commercial real estate (CRE) sector due to the increased real cost of borrowing. With rising inflation and multiple interest rate increases in 2022, both are hot topics impacting the commercial real estate industry. 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