Research Briefing | Feb 21, 2022

Real estate looks solid despite inflation and rate risks

Real estate looks solid despite inflation and rate risks Page 1While cause for worry remains relatively low, the chances of a higher inflation regime have increased. In this report, we analyse the key underlying transmission mechanisms of inflation to commercial real estate performance and their current state. Namely, interest rates, real wages and corporate earnings.

What you will learn:

  • Despite rising inflation and the threats that interest rate hikes pose to real estate, we have maintained our global all-property total return forecast for 2022 at 7.9% and for 2023 at 7.1%.
  • Factors that support our view of real estate’s healthy near-term outlook include: improving occupier fundamentals across key property sectors; strong investor demand that continues to support pricing levels; economic growth well above trend levels; and healthy corporate earnings.
  • Nominal returns will remain strong over the near term, though real returns in advanced economies will be squeezed.
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