As inflation rattles economy, CRE holds steady for now
Despite inflation rising to 3.3 percent annually in March, commercial real estate remains steady for now, but economists warn that rising maintenance and borrowing costs could eventually affect landlords and property values. Rent growth is still expected to be positive across most sectors, except office space.
Inflation rose to 3.3 percent annually in March, driven by an energy price shock tied to the Iran war. The 10-year Treasury rate, a benchmark for commercial real estate borrowing costs, increased to about 4.4 percent by late March. Economists say the impact on real estate will be slower and more muted, but rising maintenance and borrowing costs could eventually affect landlords and property values. This year's rent growth is still expected to be positive across every sector except office. Tenants may remain cautious if consumer demand takes another hit, particularly in retail and industrial sectors. Residential rents are still expected to grow 2 percent nationally and 3.8 percent in New York City.
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