The Perfect CRE Storm

After a week of webinars and conference calls to digest and re-digest the awful news in the marketplace about our industry (transaction volume down 89% from the high in 2007), I happened to notice one snippet in an email from a fellow professional about what he observed about how inflation is lurking just around the corner.

All of this suddenly made me somehow remember the movie (and book), The Perfect Storm and how they, ever so briefly, explained how the “event” is the result of two absolute opposites in atmospheric phenomenon…a severe low-pressure system colliding with a extreme high-pressure “dome” creating what the weather guys (and us sailors as well) get excited about as a “steep pressure gradient” meaning a huge amount of turbulence and WIND.

Well Readers, that is exactly what is headed our way in the commercial real estate business. We are experiencing some of the most rapid devaluation of assets ever recorded in our nation’s economic history. Interest rates are artificially low to hopefully stimulate the economy and recharge the spending-batteries. When that happens, history tells us that no amount of Fed-tinkering will keep us from experiencing inflation and since the money supply has doubled in the past 9 months and the printing presses at the Fed are still churning it out day and night, what do you think the chances are that they will control it when it happens?

Now, take a moment and reflect….what asset class always benefits the most from inflation? DUH……real estate has and always will.

So, you think the times we are in right now are turbulent? Stick around for the next 24 months and take notes. Five years from now, the people who bought in at this point will look like they all went to the Warren Buffet school of SMART.

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