While rapid inflation is plaguing many parts of the economy, the impact is relatively muted for commercial real estate tenants and landlords, both of which should be more focused on real estate market conditions.
Real estate costs tend to be fixed with predetermined escalations on deals that typically average five to seven years nationwide. Occupiers can generally predict future rental costs, but lease types will determine how much exposure to utilities, maintenance and other variable costs tenants will bear as expenses rise. Net-lease deals expose tenants to the greatest risk of inflation for expenses, but can provide the greatest cost certainty on long-term rent costs as these deals tend to have the longest terms.
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