Look to apartments during periods of high inflation
Our analysis of property total returns and inflation suggest that the apartment sector is best positioned to weather the inflation storm in the US. While there is some variation by city, most US cities we analysed had apartment returns that were relatively well insulated when acyclical inflation is high nationally.
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- Conversely, returns for offices, both at national and city levels, were returns severely impacted by periods of acyclical inflation. Specifically, historical returns for gateway offices, like Los Angeles, New York, Chicago, and San Francisco, were most severely impacted during high inflation periods.
- While the winners and losers in both the industrial and retail sectors have been a mixed bag historically, we expect several industrial markets will perform better than historical trends suggest.
- Despite the wide-ranging effects on property returns, we still believe that real estate will significantly outperform other asset classes.