The assumption you often hear in CRE is that real estate provides a good hedge against inflation. The idea is that rents can go up with the cost of living, allowing landlords to keep value through improved net operating income.
Consulting firm McKinsey did an analysis to see if the common wisdom was correct. And it was, well, the result at least, but not the rationale.
"According to McKinsey's analysis, CRE outperformed inflation, its own historical average, and other asset classes (including stocks, bonds, and gold) during most of the last seven periods of elevated inflation," the firm wrote. "However, there's a wrinkle in the data that contradicts accepted wisdom: CRE performed this way despite rents generally not keeping up with inflation."
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