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The U.S. is currently experiencing a period of high inflation, estimated at 8.3 to 8.5% throughout 2022. This is markedly higher than the global inflation rate average of 7.4%, but unfortunately, on-trend with inflation and the precipice of economic uncertainty experienced throughout the world. As a result, the rapid increase in inflation is causing justified worry among investors. Still, those with significant investments in commercial real estate are likely poised in an excellent position to weather this economic uncertainty. 

As inflation rates rise, the cost to build increases significantly and raises the value of existing properties along with it. This not only increases your loan-to-value ratio for commercial investment properties but can drive demand for leases. Regardless of economic predictions, businesses will need brick and mortar for their business. Both existing properties and new commercial developments can capitalize on rising inflation. 

Grow your cash flow

Blackstone, an investment management firm, suggests investors take advantage of shorter lease terms to grow their cash flow. While longer lease terms are valuable for periods of economic downturn, they do not do as well in times of high inflation when rents are rising nationally. Tenants may also wish to lock in a shorter lease term to provide mobility in the uncertain future, especially as more businesses are converting to partial or full online sales, changing their brick and mortar needs. 

As more businesses lean into online sales, they require more office space and less retail space. This is not true for all industries and sectors but may make businesses think twice about a long-term lease in a rapidly changing economy. Companies may look for other lease options that are flexible for their needs, such as real estate as a service. Shorter, more flexible lease terms may prove advantageous for upcoming years as investors and tenants create more agile real estate strategies. 

Work With Legacy Commercial Group

Legacy Commercial Group works with clients to help weather the storm of high inflation and economic uncertainty with value-driven commercial investments. We individually vet and select opportunities in areas of high growth in suburban and urban areas, including top franchises, retailers, and commercial developments in a variety of industries. Our diversified portfolio of transactions shows Legacy’s proven track record for securing high-performing commercial real estate opportunities for clients across the U.S. 

If you want to bolster your portfolio against rising inflation, talk to your Legacy Commercial Group Consultant about current listings and options.