There is no official body or organization that formally declares when the US economy enters a period of stagflation –  that is, an economy characterized by slow economic growth, high unemployment, and high inflation occurring simultaneously. And it is highly debatable whether the US economy is suffering from these conditions or may in the near future. However, a growing number of observers believe CRE specifically has a problem with it, including most recently CoStar Group.

It notes that the current rise in borrowing costs coincides with a significant slowdown in income growth across most property sectors, as property incomes peaked at 8.4% year-over-year in the first quarter of 2022, but have since tumbled to 3.6% in the first quarter of 2024. "The current stark reduction in property income signals stagnation inside commercial real estate, with sluggish income growth averaging 3.6% across all sectors, barely outpacing the headline inflation rate of 3.4% in April 2024," it said.

So far the impact of stagflation is varying widely by sector, it continued, noting that REIT-owned manufactured homes, industrial properties and healthcare facilities reported hearty annual income growth averages of 8.4%, 7.8%, and 7.6%, respectively, while the apartment sector showed a meager 2.5% annual income growth average. And property income growth averages for the office and self-storage property sectors have turned negative, each experiencing around -0.3% average income growth year-over-year.