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The impact of Gross Domestic Product (GDP) on CRE is two-fold depending on the transaction side. For investment property owners, the impact stems from long-term leases w/ fixed rents over an extended period of time; such as NNN single-tenant net leases…i.e…CVS, Walgreens, etc. During said period, Owners are hampered w/ extremely limited opportunity to achieve rent increases; a percentage that’s optimal for keeping pace with the inflation rate. As a result, increased operating expenses from supply chain disruption continue to mount as the discount value on today’s dollar steadily erodes income and return on investment. From the Buyer’s side, spending is lessened due to rising interest rates as a rapid pace. Traditionally, every ½ percent rate increase translates to approximately -5% decrease in purchasing power. High GDP shifts elevated costs of materials to builders for new construction thus trickling down to consumers in the form of increased purchase pricing. Will be interesting to see how the current scenario plays out; high consumer demand, supply chain constraints, elevated cost of goods, rising interest rate vs the pattern of consumer spending.

Fed Rate Impact Purchasing Power - With the recent FED rate hike by 0.25% or 25 basis points; one basis point is equivalent to 1/100th of a percent, the cost for lending institutions to borrow money from the Federal Reserve has increased thus creating a trickle-down effect to consumers engaged in the real estate market. Investors seeking stabilized performance property opportunities will be impacted by way of higher interest rates which means less purchasing power. From a Property Owner’s perspective, said financing increase will lessen the pool of qualified buyers thus resulting in strong potential for downward pressure on market resale pricing. The caveat is real estate demand remains high while housing supply; rentals and primary residence, remains low as evidenced by today’s Seller’s market climate. As an Investor or Property Owners, strongly consider starting a reassessment of your respective investment strategy as opposed to futile attempts towards timing the marketplace.

In today’s economic climate, tenant requirements for neighborhood retail space (2,500 SF and less) have become even more reliant on business platforms that feasibly are positioned to achieve sustainable within a shorter timeframe; more so for start-ups. The traditional 5-Year lease term w/ renewal option appears to align more favorably for franchisees due to brand recognition and credibility of the respective consumer service provider. For start-ups, 2-3 year commitments look to be more reasonable as new entrepreneurs are facing the hurdle of absorbing significantly higher cost of goods and services from inflation (7 percentile range and rising) while establishing the business within a 3-6 month window. Striking a balance between adequately-capitalize tenants with a thoughtful business plan and property owners empathetic to anticipated tenant growing pains will be paramount in the ever-evolving future of neighborhood small business.

Major accomplishment for City of Newark regarding newly-appointed Transit Village designation status; an attribute poised to positively impact its economic landscape and perpetual renaissance. Read on for details.

Newark Wins Designation As Transit Village in New Jersey City Now Qualifies for Program Aimed at Spurring Development

What's the most appropriate approach for investors of investment property to consider as it relates to cap rates? Should this index correlate with interest rate volatility or one's respective capex costs exposure? Read on for a varied perspective.

How to Make Sense of Where Cap Rates Are Headed | GlobeSt Here’s the key: ask yourself what factors will drive every market participant’s perception of risk