Safe as offices: Commercial real estate as a hedge against inflation

The first half of 2022 has forced equity investors to think carefully about their exposure to fluid economic conditions. With interest rates heading higher as central banks take action against inflation, investments that did well in the past two years have come under heavy pressure. A torrid first half of the year has taken the decline in the S&P 500 to 23% since the start of 2022 – and nearly 32% for the growth-focused Nasdaq-100 index.

The outlook for the global economy and markets has turned perilous. On top of persistent inflation, the Russia-Ukraine war and renewed Covid-19 lockdowns in China have dimmed growth prospects in the near term. Economists have warned that the US may be heading for a recession as higher rates sap consumer spending. More than 60% of global CEOs expect a recession by the end of 2023, according to a survey released in June by the Conference Board.

Certain sectors and asset classes can be expected to offer greater protection against inflation and rising interest rates than others, though.

Take commercial real estate for example. While residential real estate tends to struggle when interest rates push up mortgage costs, commercial landlords are able to pass on increased costs to their business tenants, helping commercial properties hold their value.

Major investors are paying attention. Commercial property investment soared 55% in 2021 to a record $1.3 trillion in 2021, according to CBRE.

The Covid-19 pandemic has slowed the growth of premium office rents in major cities, but it has not proven to be the end of office life that many had predicted. According to real estate specialists JLL, established markets like London have largely maintained top rents for premium office buildings. The UK capital is not alone: office costs in Midtown Manhattan have increased since 2020 to tie with Hong Kong’s Central district for the world’s most expensive office market per square foot.

Commercial real estate, of course, is still affected by the prevailing uncertainty. It is impacted by all the macro factors that are affecting equities, with the added unknown of how quickly workers will return to offices in the post-pandemic era.

While some may want to diversify away from the sector, others see opportunity. British Land, a FTSE-100 listed property developer, recently sold a major London office development to Singapore sovereign wealth fund GIC, which is adding to its portfolio of prime London properties.

Positive equity

In the equity markets, rental income from offices and shopping malls also supports equity valuations and may prove especially attractive for investors looking to switch from growth to value stocks. For equity investors who are focused on cashflows, real estate investment trusts also offer predictable distributions even in turbulent times.

Gaining exposure to real assets does not necessarily mean selling shares to fund bricks-and-mortar purchases. Through securities-based financing, long-term shareholders can access funds for any purpose without sacrificing the potential for long-term capital gains or dividend accumulation. This financing tool can be used to help add commercial property stocks to a diversified equity portfolio, or invest in bricks-and-mortar assets themselves.

Leverage existing assets to finance investment can also make sense in a period of higher inflation because borrowers benefit as the value of money declines, which reduces the value of their obligations in real terms.

EquitiesFirst provides progressive capital for accredited investors, professional investors, and otherwise qualified investors with experience of securities-based financing. Our products offer funding for any purpose – including for investors who wish to increase their exposure to commercial property.


Past performance does not guarantee future returns, and individual returns are not guaranteed or warranted.

This Document is intended solely for accredited investors, sophisticated investors, professional investors, or otherwise qualified investors, as may be required by law or otherwise, and it is not intended for, and should not be used by, persons who do not meet the relevant requirements. The content provided herein is for informational purposes only and is general in nature and not targeted to any specific objective or financial need. The views and opinions expressed in this Document have been prepared by third parties and do not necessarily reflect the views and opinions of EquitiesFirst.  EquitiesFirst has not independently examined or verified the information provided herein, and no representation is made that it is accurate or complete.  Opinions and information herein are subject to change without notice.  The content provided does not constitute an offer to sell (or solicitation of an offer to purchase) any securities, investments, or any financial products (“Offer”). Any such Offer shall only be made through a relevant offering or other documentation which sets forth its material terms and conditions. Nothing contained in this Document shall constitute a recommendation, solicitation, invitation, inducement, promotion, or offer for the purchase or sale of any investment product by First Holdings, LLC or its subsidiaries (collectively, “EquitiesFirst”), nor shall this Document be construed in any way as investment, legal, or tax advice, or as a recommendation, reference, or endorsement by EquitiesFirst. You should seek independent financial advice prior to making an investment decision about a financial product.

This Document contains the intellectual property of EquitiesFirst in the United States and other countries, including, without limitation, their respective logos and other registered and unregistered trademarks and service marks. EquitiesFirst reserves all rights in and to their intellectual property contained in this Document.  The Document should not be distributed, published, reproduced or otherwise made available in whole or in part by recipients to any other person and, in particular, should not be distributed to persons in any country where such distribution may lead to a breach of any legal or regulatory requirement.

EquitiesFirst make no representation or warranty with respect to this Document and expressly disclaim any implied warranty under law. You acknowledge that EquitiesFirst is not liable under any circumstances for any direct, indirect, special, consequential, incidental, or punitive damages whatsoever, including, without limitation, any lost profits or lost opportunity, even if EquitiesFirst has been advised of the possibility of such damages.

EquitiesFirst makes the following further statements that may be applicable in the stated jurisdiction:

Australia: Equities First Holdings (Australia) Pty Ltd (ACN: 142 644 399) holds an Australian Financial Services Licence (AFSL Number: 387079). All rights reserved.

The information contained on this Document is intended for persons located in Australia only and classified as a Wholesale Client only as defined in Section 761G of the Corporations Act 2001. The distribution of information to persons outside this criteria may be restricted by law and persons who come into possession of it should seek advice and observe any such restriction.

The material contained in this Document is for information purposes only and should not be construed as an offer or solicitation or recommendation to buy or sell financial products.

The information contained in this Document is intended to be general in nature and is not personal financial product advice. Any advice contained in the Document is general advice only and has been prepared without considering your objectives, financial situation or needs. Before acting on any information, you should consider the appropriateness of the information provided and the nature of the relevant financial product having regard to your objectives, financial situation and needs. You should seek independent financial advice and read the relevant disclosure statements or other offer documents prior to making an investment decision about a financial product.

Hong Kong: Equities First Holdings Hong Kong Limited is licensed under the Money Lenders Ordinance (Money Lender’s Licence No. 1681/2023) and to carry on the business of dealing in securities (Type 1 licence) under the Securities and Futures Ordinance (“SFO”) (CE No. BFJ407).  This Document has not been reviewed by the Hong Kong Securities and Futures Commission. It is not intended as an offer to sell securities or a solicitation to buy any product managed or provided by Equities First Holdings Hong Kong Limited and is only intended for persons who qualify as Professional Investors under the SFO. This document is not directed to individuals or organizations for whom such offers or invitations would be unlawful or prohibited.

Korea: The foregoing is intended solely for sophisticated investors, professional investors or otherwise qualified investors who have sufficient knowledge and experience in entering into securities financing transactions.  It is not intended for, and should not be used by, persons who do not meet those criteria.  

United Kingdom: Equities First (London) Limited is authorised and regulated in the UK by the Financial Conduct Authority (“FCA”).  In the UK, this Document is only being distributed and made available to persons of the kind described in Article 19(5) (investment professionals) and Article 49(2) (high net worth companies, unincorporated associations etc.) of Part IV of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (‘’FPO’’) and any investment activity to which this presentation relates is only available to, and will only be engaged in with, such persons. Persons who do not have professional experience in matters relating to investment or who are not persons to whom Article 49 of the FPO applies should not rely on this document. This Document is only prepared for and available to persons who qualify as Professional Investors under the Markets in Financial Instruments Directive.