Asset managers have long seen real estate as an effective hedge against inflation. However, these are not normal times: over the next two years, economists and investors are predicting an enormous right-sizing of asset prices in the commercial property sector to the tune of hundreds of billions of dollars.
It is difficult to overstate the significance of such a change. According to McKinsey, in six of the previous seven inflationary periods between 1980 and 2022, US commercial real estate (CRE) outperformed inflation and generally fared better than equities, BBB-rated corporate bonds and US treasuries. The asset class even trumped gold.