This edition of the NAREIT Podcast focuses on REIT investment in periods of high inflation. Jacob Frydman, CEO of privately held real estate investment and advisory firm United Realty Partners, joined NAREIT editorial director Allen Kenney for a podcast to discuss the inflation-hedging benefits of commercial real estate investment.
Frydman offered his thoughts on the impact of the federal government's quantitative easing programs and their effects on retirement funds.
"It's critical that people consider the impact of what that inflation might look like tomorrow," Frydman said. "We've lived in a very nice 25-year period with limited inflation, but you just have to think back to 1980, when our prime rate wasn't 3.25 percent like it is today. It topped out at over 20 percent, and people were able to buy certificates of deposit at 14 percent or better. While that sounds very enticing, the pain in getting there might not make it so enticing."
Frydman said the levels of inflation witnessed during the 1970s and 1980s could "devastate" the retirement portfolios of investors with holdings in fixed income or liquid securities. He encouraged such investors to consider dedicating some of those allocations to "something more akin to a hard asset" for inflation protection. That would include commercial real estate, and Frydman indicated that he's expecting an increase in REIT investment in retirement portfolios.
"Usually, a smaller investor is not able to access large commercial real estate assets," he said.