It is evident that there is a direct correlation between inflation and the pricing of commercial real estate. Often, the “cure” to inflation is an increase in federal interest rates which have a direct impact on commercial real estate valuations. Economists have been expecting an increase in interest rates but were not expecting the federal government’s recent suggestion of three potential hikes in 2022. Additionally, there are rumored hikes in 2023, and more in 2024. The message is clear: due to the rapid inflationary pressures, driven largely by supply chain disruptions, the Federal Reserve has an aggressive plan to increase these rates.
