Will the Russian Oil Ban Spillover to the U.S. Economy?

Boycott of Russian Oil to Further Raise Energy Costs

• U.S. announced unilateral boycott of Russian oil, which makes up less than 10% of U.S. oil imports
• Plans to cover oil shortfall will take time to realize; temporary solutions unlikely to keep oil price low
• Impact already being felt with elevated gas prices, expected to boost inflation by 1%-2% this year

Greater Inflation Increases Economic Risks

• Higher inflation puts upward pressure on interest rates; likely to slow economic growth in 2022 and 2023
• Economists still forecast 2022 economic growth greater than 3%; concerns for potential recession growing

How Can CRE Investors Prepare for Turbulence/Uncertainty?

• Positioning into MOB or Apartments can capitalize on demographic trends to ride out possible recession
• Self-Storage performed well through last two recessions and benefitted from pandemic-induced lifestyle changes
• STNL Retail good defensive asset with cap rates running in 5%-7% range; Industrial remains strong in current cycle

*As of March 07
Sources: Marcus & Millichap Research Services, Energy Information Administration

Watch the Video Below