Inflation has been a top concern for investors over the past several months, according to Clarion Partners in its recent outlook report.
It is well-documented that real estate can — at least partially — hedge against inflation, reports Clarion Partners. For one, landlords generally have the ability to raise rents under better economic conditions, which in turn increases property value. Second, many real estate leases have contractual rent bumps that are often linked directly to annual inflation rates. And third, higher inflation suggests higher replacement costs, including construction materials, labor, and land parcels. Such factors make new development projects more expensive, which should limit new supply and give more room for existing assets to grow rents and appreciate in value.
Historical precedent suggests and Clarion Partners believes that private real estate can effectively hedge inflation.
To read the full report,