People are very worried about inflation right now. It is as high has it has been in 40 years. Most fear abiding inflation, recession, and even a possible collapse. Economists, however, on average predict inflation to have peeked or to soon peek, and then be back in the 3% range by 2024.
Commercial Property Executive Peter Muoio https://www.commercialsearch.com/news/what-inflation-recession-risk-mean-for-cre/
However, the Fed is in a tight spot. They have signaled the need to raise rates, but doing so does often lead to a recession. At the same time the federal administration continues to announce large spending. The Fed has cranked up the printing presses recently to add 1/3 to the existing supply! Which was already …. !
Many people are receiving their tax appraisals and are apoplectic. Fortunately, tax rates normally adjust to create a stable revenue, so higher valuations may not mean the similar percentage increase in property taxes.
Here is what the Teas Real Estate Research Center at Texas A&M says: https://mailchi.mp/mays/news-release-ee769ze2hc
What does all this mean for commercial real estate? We understand that multifamily often does well in times of inflation, because income and rents can rise. But is that true now? With dramatic capital influx to the South and Southwest, but wages and salaries not keeping pace? And demand struggling to keep up?! Often offices do well in recession. Will that continue when supply is uneven and materials are scarce? Will higher interest rates cause a pull back in investments, and so equal out for demand? When securities, bonds, and even the US dollar is shaky?
The analysts sound encouraging; things are not as bad as the end-of-the-world preppers say. We here at Captex don’t make many predictions. We still do like commercial real estate. And we still like Central Texas.