Hot Topic – Inflation

As the new year begins, a hot topic has been inflation and how it impacts  our industry and business. Inflation is a measure of the rate at which the general level of prices for goods and services is rising and, subsequently, purchasing power is falling. Central banks attempt to limit inflation, and avoid deflation, in order to keep the economy running smoothly.

In the context of commercial real estate, inflation can have a number of impacts. One of the most significant is that it can affect the value of the property. As the cost of goods and services rises over time, the value of a property may also increase, due to the expectation that it will generate higher levels of income in the future. This can be particularly true for properties that are leased to tenants, as the rent paid by tenants is often tied to the overall level of prices in the economy.

Inflation can also affect the cost of owning and maintaining a commercial property. As the price of goods and services increases, the cost of repairs, renovations, and other expenses associated with the property may also rise. This can impact the profitability of the property and the ability of the owner to generate a positive return on their investment.

Overall, it is important for commercial real estate investors to be aware of the impact of inflation on the value and profitability of their properties, and to factor this into their investment decisions.