The EconomistThe Economist

Recession fears weigh on commercial property

By The Economist

26 Jul 2022 · 3 min read

The Economist analyses how economic worries have turned a profit-making rental property business into one that's stuck with lower return on assets.

Curated by informed

Property is usually regarded as a good hedge against inflation. Landlords’ ability to increase rents can cushion the blow from rising costs. If inflation is driven by strong economic growth, rents go up, buildings stay full and landlords are assured of rising income.

Worries about the economy, however, have turned this strategy on its head. Strained household budgets and stretched corporate balance-sheets could limit tenants’ ability to pay more rent, jeopardising investors’ returns. Moreover, with the cost of debt rising, owners of office towers, hotels, shopping malls and other types of property risk being stuck with lower returns on assets that may now be overpriced. Many fear a correction is coming.

The news, curated.

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