This year, inflation has become a top concern for investors. Institutional capital and major funds are planning ahead by shifting from a value-add or short-term hold investment strategy to a long-term hold business model.

"On a short-term hold, it is very difficult to make any meaningful money when the cap rates are so low. You are only going to see revenue increasing with inflation, you have to hold the property for a long time to see growth," Jahn Brodwin, a senior managing director in the real estate practice at FTI Consulting, tells

At the center of the longer-term strategy is long-term debt, usually at 10 years. Because the value of the dollar decreases with inflation, investors with long term debt are paying the loan off with cheaper money. "If you can secure 10-year money with a fixed rate, when you are at year seven, eight and nine, you are paying back debt with cheap dollars," says Brodwin. "If you can lock in long-term low interest rates followed by a period of inflation, while rents are climbing at inflationary rates, your debt is staying flat."

Want to continue reading?
Become a Free ALM Digital Reader.

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

Kelsi Maree Borland

Kelsi Maree Borland is a freelance journalist and magazine writer based in Los Angeles, California. For more than 5 years, she has extensively reported on the commercial real estate industry, covering major deals across all commercial asset classes, investment strategy and capital markets trends, market commentary, economic trends and new technologies disrupting and revolutionizing the industry. Her work appears daily on and regularly in Real Estate Forum Magazine. As a magazine writer, she covers lifestyle and travel trends. Her work has appeared in Angeleno, Los Angeles Magazine, Travel and Leisure and more.