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Specialty Asset Management

2022 Outlook

ariel shot of a farm with hills in the background

With reflationary characteristics gathering momentum as inflation remains well above trend, real assets are in an attractive position to provide both a potential boost to portfolio returns and diversification in the years ahead, particularly as liquidity still remains abundant and the supply of real assets, in general, is low.

 

Chris Hyzy, Chief Investment Officer, Merrill and Bank of America Private Bank

The downward trends that most sectors faced during the worst of the pandemic have mostly, if not completely, reversed in a sharp ‘V’ pattern for real assets, bringing us into a time of cautious optimism and recovery. The catalyst to a post-pandemic economy will shift toward increasing capital investment, tempered consumer spending patterns, less government stimulus outlays, more regionalization in supply chains and above-trend economic growth. Concerns over higher energy costs will also continue, given higher demand and stagnant capital investment in traditional sources.

Outlook

Greener technology investment will likely continue to expand as “trade off” costs become more balanced; the shift towards more renewable energy sustains upside pressure on minerals and metals, given the requirements of electric vehicles, solar panels and wind power.

Additionally, as we move forward in 2022, inflation will present a challenge and also an opportunity, as investors seek to use real assets to battle inflation.

Despite the continuing pandemic strain and uncertainty for the global economy, real assets experienced a remarkable resurgence due in part to their favorable response to the trends and indications of inflation. The hedging aspect of “hard” assets has made this asset class desirable, although it has driven home once again the need to take action before an inflationary event, not during. Demand for most of these assets is expected to remain elevated throughout 2022, and look to remain somewhat protected from the negative effects of inflation.

Global economic growth is cautiously expected to slowly improve through 2022, with the pandemic continuing to be the wild card. Supply constraints continue, which will continue to drive land values higher as meeting food demand becomes a more difficult goal. Globally, we are in much the same position as last year when it comes to meeting the worldwide agricultural demand and combating food insecurity. An escalation of global trade tensions remains a key risk to watch.

While the geopolitical and economic uncertainty remains in the post pandemic recovery, investors who are focused on the long term time horizon, can position real assets as a key strategy for portfolio diversification while potentially generating favorable risk adjusted returns. Additionally, these particular assets may provide a hedge against inflation, which by all indications, we may be seeing for the near future.

Farmland

2021 saw remarkable growth in the farmland sector due to increased income and appreciation returns driven by a combination of low interest rates, growing commodity demand and inflationary pressure. Increased commodity demand and price has been especially responsible for increased land value appreciation. This environment has created investment demand that is expected to continue through 2022 as real assets are used to battle inflation, but capital placement is expected to see further challenges from investors viewing the asset class primarily for capital preservation and portfolio diversification.

Timberland

A strong demand for wood products drove an increase in timber value, an increase also due in part to investors seeking alternatives to more traditional assets in efforts to hedge against inflation. A new group of environmentally-conscious investors has also joined this asset class in order to support their environmental, social, and governance (ESG) objectives, creating further and new demand for investment in timberland as a climate change solution. Overall, the increased demand for wood products coupled with a desire to combat inflation with investment in non-correlated hard assets is expected to keep the demand for timberland investment high in 2022, while continuing to keep prices elevated and returns compressed for now.

Energy

Oil demand in 2021 has swung back to pre-COVID levels but faces challenges in the form of government administrations seeking to limit domestic oil production and rely instead on the Organization of the Petroleum Exporting Countries Plus (OPEC+) for supply. It is expected that OPEC+ will slowly increase the available supply throughout 2022 and thus lower prices, but not significantly. Operators have also been facing increased pressure to cut emissions and this focus on a lower carbon footprint is expected to result in a focus on improving core assets and less focus on asset drilling expansion.

Commercial Real Estate

Just as Commercial Real Estate (CRE) experienced a steep dive in 2020 due to the pandemic, it has similarly pulled up sharply, correcting with the market and now keeping pace with it. The pandemic still offers challenges in sectors such as hotels and lodging and office space, whereas in all sectors the increasing challenge is inflation. Shorter term leases offer a way to keep up with rising inflation, whereas longer-term leases offer a buffer in the form of lower turnover and longer retention. The 2022 outlook is improving, with the main questions being one of performance in a time of inflation.

Farmland

Over the past year, farmland income and appreciation returns have exhibited remarkable growth. This growth has been mostly supported by low interest rates and rising commodity prices benefiting from strong demand from both domestic and export markets. These factors, combined with continued inflationary pressures, are likely to support this growth trend into the coming year.

The current land market dynamics may cause farmland investors to react in different ways. Some will be excited about the prospect of owning farmland in today’s market, while others may choose to wait for a future price correction before acquiring more land. These conditions create an opportunity for landowners who may be considering selling their farmland as prices in many areas are at or near their all-time highs. Current farmland owners could find themselves having to choose between selling their farmland in a strong market or holding onto their farmland, maintaining the diversification benefits farmland offers and looking for continued appreciation beyond today’s levels. This unique environment can create indecision and underscores the need for quality and timely information and guidance for both farmland owners and farmland buyers when evaluating acquisition or disposition opportunities.

APPRECIATION AND INCOME RETURNS

Farmland performance has been maintained and recorded by the National Council of Real Estate Investment Fiduciaries (NCREIF) since 1991 on a quarterly basis and comprises of appreciation and income returns before the deduction of management fees. Historically, rental income has been a stableand positive component of farmland investment returns. Over the past 30 years, annual total index and income returns have always reported positive values. On the other hand, the appreciation component has been more volatile. In some years appreciation outperformed yields and provided double-digit returns, while in other years annual appreciation was close to zero or negative due to unfavorable market conditions.

Annual farmland investment returns (1991–2020)

The bar chart title reads across the top “Annual farmland investment returns (1991 – 2020)”.   On the bar graph, each bar is two colors: blue on the bottom, and yellow on the top. A legend on the graph states that blue represents appreciation while yellow represents income.  To the left, along the Y axis of the graph, the graph is labeled “Returns” and is marked by increasing percentages, starting with -5% and increasing at 5-point intervals to 35%.   Along the bottom, on the X axis, the graph is marked yearly, starting with 1991 and continuing until 2020.

Data as of September 30, 2021.
Source: NCREIF.
Past performance is no guarantee of future results.
Indices are used for illustrative purposes only, are unmanaged, include the reinvestment of dividends, do not reflect the impact of management or performance fees. Indices do not represent actual individual accounts. One cannot invest directly in an index. Please refer to the end of this document for index definitions.

Relatively low interest rates, inflated dollar and growing commodity demand in 2022 will all be positive drivers for farmland values.

Income returns determine the short-term performance of farmland investments. Strong commodity  prices and rising production per acre, which drive farmers’ rental demand, is the key driver for annual income for landowners. Recently commodity prices have been rising because of supply disruptions, robust return of demand, and significant stimulus spending. On the other hand, appreciation drives the long-term returns of the asset class. Appreciation is largely impacted by interest rates and capital market conditions including inflation.

COMMODITY PRICES AND LAND VALUES

Land values have continued to appreciate and saw strong performance in 2021 when compared to historical data. In August 2021, the United States Department of Agriculture (USDA) reported an average of $4,420 per acre for cropland value nationwide. This is a 7.8% increase since 2020 and the highest appreciation rate since 2013. The Pacific region had the highest surveyed value at $7,740 per acre, followed by the Corn Belt region at $6,680 per acre. In terms of growth, the Northern Plains saw the strongest increase in cropland value at 12%, followed by the Lake States with 9.1% growth since 2020.

The recent strong commodity price environment has been an important driver in land value appreciation over the last 12 months. Cropland values are typically correlated with the type of crops planted, expected revenues derived from these crops, and the overall soil productivity of the land itself. Furthermore, the current strong domestic and export markets have created upward pressure on commodity prices and these higher revenue prospects have strengthened rental demand and rental rates offered from farmers. For example, 2021 corn prices are currently at $5.8 per bushel, the highest level since 2013 and a 19.7% increase since 2020. Similarly, 2020 soybean prices experienced a 37.21% annual increase, the highest gain since 2007, and 2021 prices have maintained around the same level with the current value at $12.86 per bushel. Current wheat prices at $8.19 per bushel are only second to the record high level in 2007 and have had the strongest gain since 2010. The combination of substantial financial stimulus and major disruptions in supply chains and labor markets have created a major price shock in various sectors, including food and commodity prices. Elevated agricultural commodity prices are expected to persist in 2022. While its is expected that growth rates should be more stable, the current supply demand fundamentals could lead to continued volatility in agricultural commodities in 2022 if production concerns arise in South America or the United States.

INTEREST RATES AND INFLATION

Capital preservation is a key goal for most farmland investors since long-term appreciation is an important characteristic of this asset class. Continued low interest rates (although increasing from zero), an inflated dollar, and growing commodity demand in 2022 will all be positive drivers for farmland values near-term. Farmland as an asset class is positively correlated with inflation and offers investors an effective hedge against rising inflation. Additionally, farmland’s negative historical correlation to other asset classes and a generally countercyclical relationship to the stock market can also help reduce portfolio volatility. Low interest rates often placed upward pressure on the underwriting of farmland since buyers are willing to pay more for a given return. Although nominal interest rates are likely to rise from current levels they are expected to remain historically low, the effects this may have on capitalization rates for farmland going forward will be dependent on the magnitude of these increases measured against inflationary pressures.

Looking Ahead

Land values and demand for farmland investments are expected to remain strong in 2022 as real assets are an important way to hedge against inflation and diversify portfolios. Unfortunately, as we look ahead to 2022 it is expected that competition for land will also remain strong as many land investors and farmers with excess capital continue to seek out increased exposure to an asset class with limited inventory. This trend has continued to drive down capitalization rates for farmland investments. Historically, farmers have been the primary buyers of farmland; however since early 2020, the market has observed an increase in diverse investors including large institutional investors, emerging farmland investment organizations (crowd-funding platforms), and private individual buyers entering the farmland market. While current valuations may seem elevated in some areas, the uncertainty of the current environment and the increasingly diverse demand for both commodities and the land they are produced on, makes farmland an attractive place to allocate capital for long term investors.

Timberland

The value of timberland markets continued to increase during the 2H of 2021 as investor sentiment drove heated demand for limited, available timberland. Market activity suggests the demand for hard assets, like timberland, remains elevated as many investors seek alternatives to traditional assets class. In addition to traditional timberland investment objectives, new investors are utilizing the asset class to meet their non-financial priorities. Sustainable forest practices and the positive environmental impact forests offer makes timberland a common sense solution for investors meet their ESG objectives. This welcomed dynamic is creating new opportunities for timberland owners and those looking to incorporate timberland into their broader wealth management strategy.

The strong demand and limited supply has placed upward pressure on timberland pricing. This has led to compressed return expectations. Despite elevated pricing, the underwriting of timberland suggest superior performance when compared to treasuries and other similar risk asset classes. Adding in inflation hedging characteristics and upside appreciation potential from alternative drivers, the investment thesis for the asset class remains sound for investors with appropriate goals.

Timberland returns and inflation (1991–Q3 2021)

The line graph chart title reads across the top “Timberland returns and inflation (1991 – Q3 2021).   To the left, along the Y axis of the graph, the axis is labeled ‘Returns’ and is marked by increasing percentages, starting at -10% and increasing at 5-point intervals along the Y axis to 40%.   Along the bottom, on the X axis of the graph, the chart is marked yearly starting in 1991 going up to 2021. Also on the bottom is a legend that designates that the green line represents the values of returns, and the dark blue line represents the values of CPI.

Data as of September 30, 2021.
Source: NCREIF.
Past performance is no guarantee of future results.
Indices are used for illustrative purposes only, are unmanaged, include the reinvestment of dividends, do not reflect the impact of management or performance fees. Indices do not represent actual individual accounts. One cannot invest directly in an index. Please refer to the end of this document for index definitions.

Timberland has long been known to provide a hedge against unanticipated inflation, boosted further by the biological performance engine.

INFLATION

Timberland has long been known to provide a hedge against unanticipated inflation, boosted further by the biological performance engine. However, after decades of low inflation, this attribute has not recently been a meaningful advantage for timberland holders. With observed short term inflation a chilling reality, and a growing concern that inflation may prove to be tenacious in the mid-term, investors are once again looking for inflation hedging “hard” assets to diversify some inflation risk.

Gold is a traditional asset for inflation hedging but offers little in return drivers except price appreciation, and prices have cycled significantly over time. Timber has often been described as “gold that grows,” as over time you have more timber to market than you started with, further influenced by changes in price.

It remains to be seen if inflation will persist for a meaningful period. However, investors now have a stark reminder of why preparing their portfolios for significant market events should be done before the event itself, since even effective implementation of a counter strategy may be hampered by market realities.

HOLD PERIOD

Investors contemplating timberland in 2022 should give careful consideration to the hold period they commit to. As a comparatively illiquid asset, it can be difficult to execute purchases and sales tactically in response to market events. Therefore, allocation to the asset class should be considered strategic and in place prior to events that could impact a portfolio. This suggests a longer term hold than typically considered for more liquid assets traded in efficient markets. This strategic hold methodology is complementary to the biologic nature of the asset class.

As discussed earlier, the biologic growth of the timber on the land itself is the main driver of traditional timberland returns. Assets are typically purchased with a variety of timber age classes. Mature timber has completed its period of rapid biological growth and has a higher market value due to its ability to be sold to wood product producers. Younger timber has a lower market value due to its inability to be sold for wood products. However, younger timber has superior growth rates and appreciates as it approaches merchantability. Regardless of the age classification, forests grow over time and become more valuable as they appreciate into higher valued wood product categories.

There has been a great deal of discussion as to what a minimum hold period should be. Short holding periods simply do not allow a sufficient number of trees the opportunity to grow into the next higher product category. Longer term holds allow for more initially purchased trees to grow into higher valued wood product categories over time. The renewability of the asset class allows for perpetual growing cycles as older forests are harvested and replanted over time. Ten years is often quoted as a recommended minimum hold period, but longer holds allow more trees to breach the next product class and creates conditions for some to grow through two or more higher valued product classes.

ENVIRONMENTAL IMPACT

There are a growing number of organizations committing to “net zero” carbon emissions over established timeframes. The importance of ESG programs and their awareness has increased significantly and is expect to drive environmental impact decisions into the future. Sustainably managed timberland is a common sense solution to help organizations meet their environmental goals. Forest landowners now have additional markets to participate in alongside the traditional wood products avenue. Historically, these two dynamics had been mutually exclusive.

Historical carbon markets required 40–100 year commitments from forestland owners that required costly oversight and excluded many practices that are part of a working forest operation. New carbon exchanges are emerging that allow landowners to defer harvests of mature timber in annual increments, which are more compatible for actively managed working forests. Currently, programs like this only offer modest revenue for forest landowners. However, alternatives to traditional timber markets are evolving rapidly as the demand for common sense solutions to climate change evolve.

SUMMARY

In uncertain economic times, incorporating timberland into an overall portfolio can help investors with low-moderate risk tolerances meet their investment objectives. A robust housing market and strong demand for wood products can keep the demand for logs high for the foreseeable future. The asset class is experiencing upward pricing pressure as many investors are pursuing a limited number of deals. This is especially true for high quality investment grade timberland located in robust markets. Despite compressed return profiles, current timberland returns offer an attractive alternative to similar risk adjusted investments. The inflation hedging attributes of timberland is a significant appeal, but timberland offers several other solutions to investors’ objectives. Traditional timber markets are driven by the production of wood products. This will continue to be a primary objective for investment grade timberland, but the growing interest in timberland as a climate change solution will become more prevalent over time.

Looking Ahead

The demand for non-correlated hard assets, like timberland, is expected to remain elevated in 2022. The strong demand for timberland investments should keep prices elevated and returns compressed over the short-term. Current market drivers, such as strong demand for wood products, should remain in place throughout the foreseeable future. This will help address the current oversupply of available wood and help balance the supply and demand side of the wood products equation. We should continue to see modest log price appreciation throughout this rebalancing. The non-financial objectives that can be met through sustainable timberland investing will continue to gain traction and offer access to new environmental markets, such as carbon storage.

Energy

The U.S. has seen a 180 degree swing in oil and gas prices in the year 2021. Since the 2020 COVID crisis, oil demand has roared back to pre-crisis levels, and it has become evident that the world will not be able to move away from fossil fuels anytime soon. The Biden administration, however, has taken an opposing view of the previous administration and has impacted the energy sector in a way that brings an outcome of lower U.S. production.

This has resulted in the U.S. going from energy independent, to now being a net importer of oil and relying on the Organization of the Petroleum Exporting Countries Plus (OPEC+) for supply. Despite Biden’s requests for OPEC+ to produce more, the OPEC+ countries have made a concerted effort to stay diligent with their supply cuts and are cautious to “open the faucet” and introduce additional supply to the market ahead of their predetermined schedule. These major supply & demand factors have brought energy prices up to $80/ bbl (WTI) and $5/Mcf (Nymex). As we move through 2022, OPEC+ will slowly introduce more supply into the market, but we expect 2022 prices to average in the $70/bbl (WTI) and $4/Mcf range.

There has been a significant effort to drawdown the backlog of DUCs (drilled but uncompleted); however, operators are not replacing them with new drilling at this point. Even with higher commodity prices, there is a hesitancy to return to heavy drilling activity. We expect this drilling activity to slowly increase in 2022 as operators begin the new year with their new capex budgets, but until that point the industry currently sits in an underinvestment position.

Baker-Hughes U.S. rig count (2013-2021)

The line graph chart title reads across the top “Baker-Hughes U.S. rig count (2013-2021)”.  To the left, along the Y axis of the graph, the graph is labeled ‘Rig Count’ and is marked by increasing numbers, starting at zero and increasing by 200-point intervals  along the Y axis to 2000.  Along the bottom, on the X axis of the graph, the chart is marked by time period of December 2013 through June 2021, at 6-month intervals.  There is one line on the graph denoting the number of rigs at each point in time.

Data as of November 5, 2021.
Source: Baker Hughes.
Past performance is no guarantee of future results.

Oil demand has roared back to pre-crisis levels, and it has become evident that the world will not be able to move away from fossil fuels anytime soon.

Looking Ahead

The higher oil prices have resulted in the return of operator activity levels. A return closer to pre-COVID levels is evident with maintenance and workover projects being more economically favorable.

The industry has made a strong effort to cut emissions from operations, and most companies pledging to achieve net-zero emissions at some point over the next 30 years, while still providing the commodity to meet the world’s oil demand for energy for decades to come. Operators have different methods to cut emissions, since not all oil & gas operations have the same carbon footprint. This focus will result in operators focusing on improving their core assets and less on expanding their acreage into and drilling those outlier assets.

Commercial Real Estate

More than a year after plumbing the depths of the pandemic, as businesses continue reopening and vaccines are achieving results, the verdict is in. For the U.S. economy, the pandemic-induced recession has played out as a steep and sharp V-shaped event, resulting in relatively little distress for Commercial Real Estate (CRE). In the same vein, CRE performance has been rapidly recovering throughout 2021 as reflected by decreasing vacancies and cap rates in concert with growing rents for many sectors. Development pipelines for these sectors are readily being absorbed into the market in response to robust demand for space by tenants.

The #1 concern for CRE investors in the near- and medium-term is inflation. And that’s what has always made CRE a core investment in high-net-worth and institutional investor portfolios alike. Rents and property values are positively correlated with rising inflation and can be an effective hedge in an inflationary environment. Real estate offers stable current returns with potential for growth in response to inflationary pressures.

This protection can be found in the structure and term of leases which helps generate dynamic and durable cash flows, along with the ability to pass along increases in construction costs due to higher component costs (land, labor and materials). All else equal, shorter leases respond to increasing inflationary pressures faster than longer-term leases; and in this regard, CRE can offer a range of diversifying inflation protection alternatives from short-term residential and storage lease structures, to medium- and longer-term warehouse and retail leases.

Real estate returns and inflation (1991–Q3 2021)

The line graph chart title reads across the top “Real estate returns and inflation (1991 – Q3 2021).   To the left, along the Y axis of the graph, the axis is labeled ‘Returns’ and is marked by increasing percentages, starting at -20% and increasing at 5-point intervals along the Y axis to 25%.   Along the bottom, on the X axis of the graph, the chart is marked by the years 1991 through 2021. Also on the bottom is a legend that designates that the blue line represents the values of returns, and the dark gray line represents the values of CPI.

Data as of September 30, 2021.
Source: NCREIF.
Past performance is no guarantee of future results.
Indices are used for illustrative purposes only, are unmanaged, include the reinvestment of dividends, do not reflect the impact of management or performance fees. Indices do not represent actual individual accounts. One cannot invest directly in an index. Please refer to the end of this document for index definitions.

CRE performance has been rapidly recovering throughout 2021 as reflected by decreasing vacancies and cap rates in concert with growing rents for many sectors.

In response to inflation, rising replacement costs put upward pressure on both nominal property prices and rents as the cost of alternatives increase and can be passed through to occupiers, while simultaneously constraining some new development projects which in turn further buoys real estate values. Limited supply of new space may help support property values; and in sectors experiencing heightened tenant demand such as industrial, storage and apartments, limited supply helps drive increases in rents and values.

SECTOR-BY-SECTOR RESPONSE TO INFLATION AND OUTLOOK

The impact of inflation and the pace of recovery will likely differ by property type and market, but emphasis on shorter lease terms in property sectors and regional markets exposed to growth factors may result in greater opportunities to capture rent growth, albeit with heightened tenant roll-over risk. Longer-term triple net leases with scheduled contractual rent increases potentially offer another way CRE may help soften the impact from inflationary pressure, generally with less upside in rent growth but without as much tenant roll-over risk because leases are longer-dated instruments that pass-through to tenants much of the expense load.

Industrial are pro-cyclical sectors, generally have medium-term to long-term leases and are often well- positioned to capitalize on inflationary pressures. Due to inflation, in-place leases may be below market when they expire, suggesting a mark-to-market opportunity to increase rents. In the current environment, landlords have significant pricing power stemming from strong tenant demand for space, which in turn is fueled by strong retail sales, a push to normalize inventory levels and continuing need to address supply chain imbalances. In many markets, rent growth exceeds the inflation rate due to these factors. Values have been driven higher during 2021 with gains also expected in 2022.

Multifamily apartments are also attractive from an inflation perspective because lease tenor is generally short and allows for mark-to-market pricing more rapidly than many other property types. In the current environment, multifamily apartments offer potential for growth with strong tailwinds in the form of increased household formations associated with an improving job market, which supports increased occupancies, lower vacancies and growth in rent. Fast increasing homes prices likely will cause some renters to stay longer — further reducing turnover and increasing already strong retention rates — which may also help drive rents higher. Values have been up strongly during 2021 with gains also expected in 2022.

Storage, similar to apartments in leasing tenor, have mostly short-term leases and permit landlords to capture mark-to-market increases due to growing rents resulting from inflationary and scarcity pressures. Storage properties have also benefited from a strong housing market resulting in high occupancy and renewal rates. Values for storage have been up during 2021 with expected growth in 2022.

Retail comes in a variety of flavors with necessity and home improvement-based centers demonstrating consistent results and tenant demand improving overall. Omni-channel retailers find value in physical stores, both as a quasi-last mile delivery hubs and to service pick-ups made by customers who buy on-line. Retail leases are often triple net, allowing landlords to pass-through expenses also impacted by inflationary pressures. Values have been up slightly during 2021 with upward momentum building in Q3 and expectations of improvement during 2022, all else equal.

Office is complicated as it generally benefits form a growing economy, but pandemic-related factors present challenges resulting in continuing and elevated vacancies rates with sluggish leasing. A slower return to office will extend this period of slow leasing velocity with lingering questions about future demand and how much space is really needed by businesses, what type of space and where should it be located. Historical trends leading to an increase in number of people per rentable square foot has come under intense pressure and possibly reverses course, as employers balance employee preferences for work- from-home flexibility with in-office presence. Tenant demand for office is a moving target but may remain soft for at least near term. Values overall have been slightly up during 2021 with a bifurcation along quality lines.

Hotels & Lodging is correlated with gross domestic product (GDP) growth with the ability to for rents to re-price nightly. This suggests heightened sensitivity to adverse demand shocks experienced during 2020. In 2021, the demand shock has been recovering, but is bifurcated along business lines. Leisure travel has surged while business travel — dependent on return to office and corporate travel calendars— has been stagnant. Values have been flat to down during 2021 with upward momentum building in Q3 and expectations of improvement during 2022, all else equal.

Values have been flat to down during 2021 with upward momentum building in Q3 and expectations of improvement during 2022, all else equal.

THE BOTTOM LINE—CRE HELPS SOLVE THE INFLATION PUZZLE

Nuanced by sector and asset selection, CRE combines return characteristics of both equities and fixed income, offering predictable cash flow with potential for growth — especially during periods of inflation.

Looking Ahead

The 2022 outlook is improving, with property market fundamentals for most sectors in good shape and CRE benefiting from the strengthening economic recovery, expanded and sustained re-opening from the pandemic, and inflationary pressure. The critical question CRE now faces centers on performance in an inflationary environment and price-yield metrics relative to historical indicators in order to help gauge fullness of values.

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