The Aqueduct by Agrippa brings you a semi-weekly dose of CRE insights—just as ancient Roman aqueducts supplied water to fuel the growth of cities, we deliver exclusive resources to keep you informed.

Quick Overview

News Brief

A recent Workplace Insight article suggests the commercial property market should be more optimistic, but it still needs to change. JLL’s Future of Work Survey reveals that 65% of business leaders expect to increase their CRE budgets by 2030, as they adapt to evolving work patterns and office space demands.

Key Takeaways

• Shift Back to the Office: 62% of businesses plan to increase office space usage, with hybrid work becoming more prevalent in larger organizations, while small-to-medium-sized companies lean towards full-time office work.

• Compensation Linked to Office Attendance: More than a third of organizations are considering introducing different pay and benefits for employees who regularly attend the office, signaling a potential shift in compensation models.

• AI Integration in CRE: By 2030, 70% of CRE activities are expected to be supported by AI, as decision-makers prioritize technology and automation to enhance efficiency and business growth.

Economic Insight

The Consumer Price Index (CPI) measures the average change over time in the prices paid by consumers for goods and services, serving as a key indicator of inflation. It tracks price changes in categories like food, housing, transportation, and medical care, providing insight into the purchasing power of households and overall economic trends.

According to the latest report from the U.S. Bureau of Labor Statistics, the CPI rose by 0.2% in August, in line with consensus estimates.

Key Points

• Yearly Overview: Over the past 12 months, the all items index increased by 2.5%, the smallest rise since February 2021, with food prices up 2.1% and energy prices down 4.0%.

• August Changes: In August, shelter—which carries the most weight in the CPI calculation—rose 0.5%, driving overall inflation. Meanwhile, food increased by 0.1%, and energy prices fell by 0.8%.

• Core Inflation: Excluding food and energy, the core index rose 0.3% in August, with notable increases in shelter, airline fares, and motor vehicle insurance, while used cars, medical care, and recreation declined.

Essential Knowledge

Capitalization Rate (Cap Rate) is a widely utilized metric that provides a snapshot of an asset’s expected rate of return based on its income-generating potential.

Often used to compare properties or assess the relative risk and reward of different investments, the cap rate serves as a key determinant in decision-making. It offers investors insight into how quickly they might recoup their initial investment, assuming stable income and expenses.

Key Considerations

• Risk and Return: Higher cap rates often indicate higher potential returns but may come with increased risk, while lower cap rates may suggest more stable, lower-risk investments.

• Market Variability: Cap rates vary across regions, asset classes, and market cycles. Properties in high-demand areas typically have lower cap rates compared to properties in less desirable markets.

• Income Stability: Cap rates assume a stable income stream. For properties with fluctuating NOI, cap rates may not accurately reflect the true risk or return potential.

Newsletter Recommendation

Cape May Wealth Weekly focuses on wealth-building strategies with an emphasis on serving family offices.

Agrippa users looking to expand their financial knowledge and optimize their investment approach will find plenty of valuable insights here.

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About the Author: Blake J. Owens is the Founder & CEO of Agrippa. Previously, he closed over $600 million in transactions as the CIO of a Las Vegas based multifamily developer. Connect with Blake on LinkedIn and X for additional insights on CRE, economics, and more.