Commercial Real Estate Investor Sentiment Remains High Despite Inflation

Inflationary pressures and geopolitical conflicts have worried some investors, but those worries don’t seem to be spilling over into the commercial real estate sector. John Chang of Marcus & Millichap, a commercial real estate brokerage, recently told BenefitsPro that investors “aren’t running scared.” According to Chang, they’re “looking past the headlines and looking at the hard facts.”

The “hard facts” are clear to see. Positive metrics in job creation, household savings, and unemployment are all good signs for commercial real estate investment. Job numbers last quarter were the second-highest first-quarter numbers on record. Unemployment is down to 3.6 percent, about 10 basis points off a record-low. Meanwhile, core retail sales are at their highest level in history, and Americans have about $18 trillion in US-based savings accounts and $5 trillion in money market accounts.

Chang said balance sheets are at their most substantial level since 1990, and, for the first time in 30 years, US households have more in cash savings than debt. All these numbers are great signs for the economy. Investors have several options in the commercial real estate market. Chang noted that real estate investors can purchase premium assets in hot markets and get cap rates in the mid-2 percent range. “Investors aren’t locked into one property type, one class, or one market. There’s an enormous menu,” he said.

Marcus & Millichap’s most recent investment sentiment survey reached its highest level since 2015. There is certainly much more turbulence in the market now because of the lingering effects of COVID, the war in Ukraine, higher interest rates, and increasing inflation. But despite all that, the surveys show many investors remain confident in commercial real estate, setting up the rest of 2022 to be another banner year for multiple asset classes.