Commercial Real Estate is not a good hyperinflation hedge due to long lease terms?
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[{"id": "f9o5og7", "text": "I would say you are right and make a good point but caveat that with 2 things:\n\n1) when the leases are up, you\u2019ll get your market rate so it\u2019s a temporary setback l, and\n\n2) go for B class or C class tenants to avoid this if you want\n\nI own a couple medical office buildings. Doctors rarely ever move but all sign 2-10 year leases so I am not stuck for 25 years. There\u2019s a trade off. Longer leases means no vacancy and turnover costs but inflation could screw you short term.", "replies": [], "depth": 1}, {"id": "f9o6a8t", "text": "Hyperinflation only exists when the currency issuing ruling sovereignty is effectively losing political power.  Usually, this happens during wartime with the losing side's currency ultimately being worth nothing or pegged to that of the conquering sovereignty.\n\nIt indirectly can happen when independent sovereignties take on debt held by another sovereignty. Usually, this is a war indemnity (Weimar). But it also can be for countries like Zimbabwe that took out loans from foreign governments denominated in their domestic currency.  But to get to that point effectively means that country cedes its sovereignty to the lending country. \n\nThe United States of America will never experience hyperinflation, and to believe otherwise means you really do not understand how money works, let alone politics.   If you think the USD will become worthless, you probably should see a psychiatrist.", "replies": [], "depth": 1}, {"id": "f9obl8e", "text": "Don't you guys adjust rents to market upon renewals? You can always try for % sale rents for retail.", "replies": [], "depth": 1}, {"id": "f9oiv45", "text": "Most commercial leases have escalations yearly or every 5 years to account for this.", "replies": [], "depth": 1}, {"id": "f9oph8s", "text": "Are you talking about ground leases? The lease renewal option terms  you mentioned are only achievable in a ground lease situation", "replies": [], "depth": 1}, {"id": "f9ow8yx", "text": "If it\u2019s a triple net lease reimbursements would increase with inflation. Also wouldn\u2019t worry about hyperinflation anytime soon.", "replies": [], "depth": 1}, {"id": "f9p9dmx", "text": "Tie escalations to CPI in the lease. Rental increases will increase the same percentage as CPI, and you\u2019re covered for inflation. \n\nIf your risk averse enough to be concerned about hyperinflation, you should avoid real estate. Stick to gold.", "replies": [{"id": "f9pmt8w", "text": "This. Why is no one talking about rent escalations tied to a CPI for your market. Literally removes all risk of inflation.", "replies": [{"id": "f9poj8s", "text": "Because you get a ton of pushback from tenants who hate doing it.", "replies": [{"id": "f9pon8t", "text": "Any sophisticated commercial tenant will understand CPI adjustments.", "replies": [{"id": "f9q7lkn", "text": "Most large national retail tenants wont agree to anything but +/-10% bumps every 5 years. You could maybe negotiate some percentage rent to try help if you are really worried about hyper inflation.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}]