The Pressure Cooker Has an Additional Ingredient

Tingting Zhang, Ph.D., Founder and CEO, The TerraCotta Group

Over the last fifteen years, real estate investment activities have been premised upon a near-zero interest rate environment and an abundance of liquidity.  With inflation rearing its head today, the real estate investment model relied upon for so many years has evaporated with rising borrowing costs, plateaued rental growth, and broad illiquidity in the financial system. This paper discusses the impact that a trifecta of factors – inflation, recession, and secular shifts – will have of commercial real estate (CRE), examining in turn each of the four major asset types – office, retail, multifamily, and industrial.  The paper concludes by identifying some of the opportunities for CRE credit in this challenging environment, and how we are positioned to take advantage of them.