Real estate, like other real assets, tends to be an effective hedge against inflation. Rents tend to rise with inflation and in turn drives profitability and performance. As we show on the LHS, historical real estate income return tends to beat inflation on a year-over-year basis, The exception has been periods of extremely high inflation such as today and in the late 1970s/early 1980s.
On the right-hand side, we outline real estate performance during different inflationary regimes. As per the NCREIF ODCE U.S. real estate index, real estate has its highest average returns when inflation is high and rising.