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What is the 2022 Inflation Outlook and Impact for Real Estate Investors?

January 17, 2022 by Marcus & Millichap Research Services

Inflation rate (CPI) hit 7.1% in December, a 40-year high

Three primary factors are driving inflationary pressure, and will likely not be resolved in the short-term:

1. Supply Chain:

  • Disrupted supply chains is restraining the amount of goods and raw materials available to the market
  • At the same time, consumption is elevated with inflation-adjusted retail sales up 16% from pre-COVID
  • This is supply-demand mismatch is stoking prices and putting upward pressure on inflation

2. Labor Shortage:

  • Record 4.3M shortfall of job openings and people looking for work creating wage pressure
  • Rising wages is a “sticky” form of inflation and will likely stay with us even after the shortage is resolved

3. Housing Shortage:

  • Lack of affordable housing options is putting upward pressure on rents and home prices
  • Rapidly rising housing costs will keep inflation elevated over the short to mid term

Additionally, the Federal Reserve has signaled a more hawkish stance in an effort to relieve elevated inflation pressure. For CRE investors, this could mean rising interest rates over the short term, as the industry’s inflation-resistant reputation draws new capital.

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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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