Commercial property sectors, other than office, have recovered well after the shock of the pandemic. Generational demographics and a particularly robust job market have sustained demand, and rents and occupancy are continuing to rise, albeit at a slower pace than last year. The fundamentals are good, yet property investors are appropriately nervous. They face the triple threat of higher interest rates, higher inflation, and a high probability of recession, each of which will impact the performance of their real estate investments in different ways. As we mentioned in our commercial real estate mid-year review, these external factors are already slowing down transactions and impacting asset values, despite the otherwise superb performance of the properties themselves.
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