Commercial Real Estate Investing: A Safe Haven For Investors Amid Rising Inflation?

The quickly spreading inferno that is inflation — among other changes in the macroeconomic environment — has become a major concern for investors in the commercial real estate world leaving many questioning if the old rule of thumb that ‘investing in CRE provides a hedge against inflation,’ still holds up amid steep yearly cost increases.

“Inflation numbers in the U.S. are through the roof, at 8.56% — one of the highest numbers registered in the last three decades,” Mohsin Masud, CEO and founder of AKRU, said during his keynote address at the annual Security Token Summit in New York City. “Meanwhile, over the past year to date, the stock market was down more than 16%, with the Dow Jones down more than 12%.” This is driving the need for increased access to non correlated assets. 

For a long while, it was believed that crypto would be the next frontier of assets to invest in, however Bitcoin prices are now also down more than 35% year to date.

Any prudent investor that monitors inflation on their watchlist can see an asset value change quickly. So, what does this mean for CRE?

Is Commercial Real Estate Inflation Proof? 

It is generally accepted that during times of high inflation, it is best to own “hard” assets like commodities and real estate because their prices tend to rise in tandem with inflation.

For instance, in the fourth quarter of 2021, the commercial real estate sales volume for multifamily homes was up over 116%, according to CBRE, as opposed to being in the red on all the other assets in your traditional investment classes, Masud said.

“This can be one of the benefits of real estate — because it is non correlated, that is it tends to be less affected by volatility — and that's where AKRU comes in,” he said.

How AKRU enables CRE Investing

AKRU, which was founded in 2018 with the objective of democratizing real estate through tokenization, streamlines the process of investing in commercial real estate while also eliminating the biggest issue for would-be investors by cutting out the high barrier to entry and allowing for investments as small as $1,000.

“AKRU offers single direct investment. We tokenize assets on a single asset level, and we enable liquidity,” Masud said. 

Traditionally, real estate is known as one of the most illiquid asset classes, which requires significant capital commitments and entails long transaction processes. The typical holding period for real estate debt, for example, is four to seven years. Retail investors face the challenge of entering into real estate deals without large amounts of capital available.

AKRU’s process of tokenization enables liquidity by giving users a platform where they can engage in customized transactions and purchase assets with more flexibility. Tokenization breaks large, expensive investments into fractional investment “slices,” creating a security token for each piece.

The company also recently launched its margin trading product. Through this effort, AKRU seeks to partner with traditional financial institutions to provide securities backed-lending through its security tokens. These banks underwrite each asset that is listed and if you are a token owner, you can borrow up to 50% of it any day.

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