Commercial real estate has long been regarded as an inflation hedge, but economists from Moody's Analytics say that adage will be tested this month as the Fed begins the first in a series of expected rate hikes. 

"This is the Fed's attempt to curb inflation that hit 40-year highs in 2021 and which is likely to continue at elevated levels given inflationary pressure from the Ukraine-Russia military conflict, high oil prices, intensified supply chain issue, and labor shortages at home," Moody's analysts Kevin Fagan, Stephanie Yu, Xiaodi Li, and Victor Calanog write.  But while concerns over inflation have driven a record slew of investors to CRE over the last year, they say, the property markets are diverse.  And "in times like these, investors, particularly on the debt side, must adhere to another, even older adage: caveat emptor."

Moody's expects another record-setting investment year in 2022, despite the rapidly evolving conflict in Ukraine. But they warn that CRE "is not a single commodity," and that using property as an inflation hedge requires nuance.  Specifically, "to capture the benefit of revenue growth during inflationary times (or to mitigate downward pressure on values from rising rates), there must be demand for the asset to push net operating income on par with inflation."