Viewpoint update: Inflation impacts everyone. 9.1% is the largest increase in inflation in 47 years. When inflation was last this high, “Don’t Stop Believin’” was in the Billboard Top 10 and I was just a young child.
So why is inflation increasing? Business leaders in Pittsburgh and throughout the country are asking me this question. The list of reasons is extremely extensive but starts with the pandemic, rising consumer demand, tight supply, labor shortages, the Russian invasion of Ukraine, shipping delays, and rising transportation prices. These variables collectively result in rising prices.
Consider recent data demonstrating price increases:
Energy 41%+Gasoline 59%+Airfare 34%+Use vehicles 7%+New vehicles 11%+Food 10%+Home prices 20%+Materials for a single-family home 42%+
So how does inflation affect Pittsburgh's economy and businesses? Our Viewpoint blog tells the story.
Numerous economists predict that the annual rate will continue high through the rest of the year and start to taper off around the end of 2022, finally falling to between 4.5 percent and 3 percent.
Depending on the particular asset class and rent roll, the effects on commercial real estate vary. Businesses are altering how they use their space because of the effects of work-from-home policies and the fact that some now have a distributed workforce. Landlords might generally boost rents due to rising inflation and leases expiring, but since so many businesses are still working from home, they are in a bit of a pickle. Although their expenses have increased dramatically as well, they do not want to take the chance of losing the Tenant. Nobody is exempt from the ravages of inflation. Additionally, Landlords are prohibited from lowering rental rates below their debt covenants without the consent of their lender. Did I mention the pickle?