Increased Rental Rates
Commercial real estate investors can mitigate the effects of inflation by increasing rental rates. As new tenants come in, an investor can adjust the rental rate according to the updated value of the dollar. As long as the rate of inflation is less than the increasing rate of the property’s value, then the investor is in good shape. The maintenance costs of the building should also remain relatively stable.
Natural Scarcity of Space
Scarcity can lead to an increase in demand, which in turn drives up prices. Over time, space becomes scarce in many different areas, including cities, growing towns, and even entire countries. When building space becomes scarcer, it leads to a healthy kind of inflation. Commercial real estate is a valuable asset that can protect investors and increase income.
Increased Rates by Intervals
The method for increasing rental rates varies based on the type of property. For properties with long-term leases of twenty years or more, there is still a way to account for inflation. Some leases enable investors to adjust the rental rate in intervals proportional to inflation. The extent of these increases may vary.
Factors That Affect CRE Negatively
Certain factors can affect how inflation impacts commercial real estate investments. While not all inflation is bad or always good, a healthy and growing economy typically experiences an inflation rate of about per year. However, inflation resulting from stagnant demand, increased unemployment, or other factors can make it challenging for investors.The type of property is also an important consideration. Many factors, such as the lease length and demand for that specific property type, can influence whether a CRE investment succeeds or struggles. Moreover, rising operational costs can also significantly impact the value of a CRE investment.
Regardless of the situation, Clagett Enterprises is always ready to assist you in buying or selling commercial real estate in the Frederick, Maryland, area. Commercial properties are always in demand, and we’re here to help you navigate the process.
Trust the Professionals at Clagett Enterprises for Your Realty Needs
If you’re looking for an experienced property management company, the perfect realtor for your property, or a professional to assist you during your home purchase, you can rely on Clagett Enterprises. Clagett Enterprises is a full-service real estate company with almost 30 years of experience in the Frederick and Western Maryland area. For assistance with commercial sales, leasing, management, and development, and consulting, contact us online or give us a call at 301-665-6009. To meet our team and see some of our beautiful homes, follow us on Facebook, Twitter, and Pinterest.