A Better Way to Assess Inflation and Risk in Real Estate
Inflation is most commonly seen as a threat to investor portfolios. This reasoning is the cause of oversimplification and basic analyses that overlook important factors. Likewise, risk-adjusted performance is often assessed narrowly or not at all. Understanding risk-adjusted behavior, and how inflation affects it, is vital if you want to truly understand your market and stay ahead of the competition.
A Better Way to Assess Inflation and Risk in Real Estate provides insight into how investors can view inflation, risk-adjusted performance, and risk in general.
Private CRE and Inflation
U.S. private CRE risk-adjusted returns tend to be larger during times of high inflation. Post-GFC, higher inflation tends to help the asset class’s excess returns.
Secondary Apartment Markets
Seen in Orlando and Atlanta apartment markets, gains are amplified in strong markets more than losses are amplified in weak markets.
Post-GFC Inflation Sensitivity
Secondary apartment market returns are more sensitive to inflation, while primary apartment markets tend to have more stable excess returns under rising inflation
Private Apartments Outperform
Compared to other property types, private apartments have the strongest risk-adjusted performance during both times of moderate and high inflation.