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The Top 3 Risk Factors For Commercial Real Estate Investors

January 31, 2022 by Marcus & Millichap Research Services

Risk of COVID Continues to Decline, But Impact Still Lingers

  • Infections continue to weigh on recovery of Retail, Office, Seniors Housing and Hotels, primarily in urban centers
  • However, COVID-fueled behavioral changes boosted Self-Storage and Apartment demand

Labor Shortage Weighs on Economic and CRE Recovery

  • Property types with large staffing needs, like Sr. Housing and Hotels, have felt the biggest impact
  • MOB, Industrial and Retail face indirect risk if tenants can’t find staff and cut back on space demand
  • Labor shortage putting upward pressure on wages, supports higher rents for Apartments and Self-Storage

Inflationary Pressure Is Real and Rising, Likely to Persist

  • While Office and Retail often have longer leases, they can include escalator clauses tied to inflation
  • Apartment and Self-Storage can adjust rents once or more a year, providing higher inflation resistance
  • Hotel’s capability to change rates daily make it the most resilient against inflation

*Through November; CPI through December; 10-Year Treasury through January 26
Sources: Marcus & Millichap Research Services, Federal Reserve, BEA, BLS

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Filed Under: Research Brief

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This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Any projections, opinions, assumptions or estimates used herein are for example purposes only and do not represent the current or future performance of the property. Marcus & Millichap Real Estate Investment Services is a service mark of Marcus & Millichap Real Estate Investment Services, Inc. © 2020 Marcus & Millichap and Limon Net Lease Group

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