The U.S. economy is at a pivotal point. Is the sector at risk from escalating inflation and geopolitical shifts? Not necessarily.
Alfredo Gutierrez, SparrowHawk Founder, was recently consulted by Chicago Industrial Properties regarding the current market outlook, including how to distinguish what is true and what is not in investing based on today’s market condition.
Gutierrez said uncertainty around volatile economic factors is more of a concern than the volatility itself. Economic conditions are murky, and everyone has different opinions about what could happen. It’s true that the real estate industry looks to some of the traditional items that are in flux—such as the 10-Year T—but as to how things will play out, for sure, no one knows.
Values of real estate haven’t deteriorated, and investment communities are shifting to three-year windows rather than twelve months because of rent inflation which, according to Gutierrez, is expected to continue to inflate significantly due to low vacancies and limited space supplies. As the sector continues to experience positive absorption, new buildings are quickly absorbed.
Due to the differences between sectors, it’s fair to speculate if the above economic concerns will affect them differently. According to Gutierrez, that’s not the case. Focusing on the fundamentals and basics is important.
However, there is a cost, and Gutierrez told me that the immediate objective is to bring the industry together. Unfortunately, it will take time, and it will happen gradually.
In addition, the Fed recently adjusted interest rates, but they did so in a less aggressive manner, scripting a 5% interest rate to offset the risk of inflation exploding.
The amount of information available varies from article to article, further contributing to the previously-mentioned lack of clarity. In response to questions from investors regarding how to navigate the current market, Gutierrez stressed the importance of patience. A lot of speculation and worry accompanied 2H2022, but the fundamentals stand on their own.
