Entering text into the input field will update the search result below

The REIT Way To Think About Inflation


  • There are already signs of inflation bubbling up based on rising commodity prices, bond yields, and the housing boom.
  • However, Fed Chairman Jerome Powell is wagering it won’t get out of control.
  • REITs overall are positioned to benefit from an inflationary environment while providing attractive current income streams – which should grow over time.
  • This idea was discussed in more depth with members of my private investing community, iREIT on Alpha. Learn More »
Male Character Inflate Balloon with Dollar Sign Using Pump, Woman Holding Needle to Pierce. Economy Problem or Financial Crisis, Inflation, Bankruptcy, Capital Loss. Cartoon People Vector Illustration
Photo by lemono/iStock via Getty Images

One of the most frequent questions I get from readers these days is this:

“Is inflation about to get out of hand?

And it’s almost always followed up by this one:

“What will be the impact to real estate investment

Superior Research Leads To Superior Results

Join iREIT on Alpha today and get a "front row seat" to our "March Madness" REIT Bracketology series where we break down each property sector to arrive at the "Sweet 16 REITs" to own.

We include exclusive video so our members can get all of the latest and greatest insight and maximize portfolio performance. Our coverage spectrum includes equity REITs, mREITs, Preferreds, BDCs, MLPs, ETFs, and we recently added SPACs to the lineup.

And this offer includes a 2-Week FREE TRIAL plus my FREE book.

This article was written by

Brad Thomas profile picture

Brad Thomas is the CEO of Wide Moat Research ("WMR"), a subscription-based publisher of financial information, serving over 175,000 investors around the world. WMR has a team of experienced multi-disciplined analysts covering all dividend categories, including REITs, MLPs, BDCs, and traditional C-Corps.

The WMR brands include: (1) iREIT on Alpha (Seeking Alpha), and (2) The Dividend Kings (Seeking Alpha), and (3) Wide Moat Research. He is also the editor of The Forbes Real Estate Investor

Thomas has also been featured in Barron's, Forbes Magazine, Kiplinger’s, US News & World Report, Money, NPR, Institutional Investor, GlobeStreet, CNN, Newsmax, and Fox. 

He is the #1 contributing analyst on Seeking Alpha in 2014, 2015, 2016, 2017, 2018, 2019, 2020, 2021, 2022 and 2023 (based on page views) and has over 111,000 followers (on Seeking Alpha). Thomas is also the author of The Intelligent REIT Investor Guide (Wiley) and is writing a new book, REITs For Dummies (Wiley/Amazon).  

Thomas received a Bachelor of Science degree in Business/Economics from Presbyterian College, and he is married with 5 wonderful kids. He has over 30 years of real estate investing experience and is one of the most prolific writers on Seeking Alpha. To learn more about Brad visit HERE.

Analyst’s Disclosure: I am/we are long ACC, ADC, AVB, BNL, EPRT, EQR, ESS, FCPT, FRT, PINE, REG, SPG, UBA, UMH, VICI, WPC, NTST. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Note: Brad Thomas is a Wall Street writer, which means he's not always right with his predictions or recommendations. Since that also applies to his grammar, please excuse any typos you may find. Also, this article is free: written and distributed only to assist in research while providing a forum for second-level thinking.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (46)

Retire2020 profile picture
Thanks Brad for another great article.
Hey Brad, thank you for coming through with your long-anticipated (well, since yesterday, in my case) article. I'd been looking forward to your assessment on office REITs' ability to thrive in a higher-rates and/or higher-inflation environment, but I found no mention of the sub-sector (maybe that's not a good omen!). Do office REITs generally sign leases with inflation-based step-up clauses? Might the 2020/2021 demand crunch be leaving them more poorly positioned to negotiate favorable lease terms that include such protections? I ask because I am long SLG, BXP, CIO, and HIW. Thanks in advance for your thoughts!
Keep it Country profile picture
Net lease REITS "low costs leaders" also have the advantage of very low expenses. They are not impacted as much from the rising maintenance, property management costs but they do benefit from the rent escalators.
Brad Thomas profile picture
@Jackson Falls NH Correct. Thanks for reading and commenting...

Come and visit us at iREIT on Alpha ;)
Sure are long a lot of good dividend stocks. Brad must be very wealthy by now and lots of income off those dividends
Brad Thomas profile picture
@johnny corsaro if wealth is defined by family, I am rich beyond your wildest imagination... 5 kids + wife = BLESSSED

All the best - B
@johnny corsaro if you read him he is, he was up in 2008 then took a dive in his finances. But he is back. Read his last articles is in there!
@Brad Thomas looks like it
I love this article. I have thought for years that Reits are the better bond alternative. I think it is crazy that people run from Reits when interest rates are rising. I remember in 2017-2018 when Reits sank for months. . . until March 2018 when people did a collective forehead slap and reits rose 20% until the market top in July. Reits are inflation protected, because rents rise with inflation, albeit with a lag. Long CTO.
Brad Thomas profile picture
@nkaln31 Thanks for reading and all the best - Brad
"the potential for higher inflation primarily comes down to government spending."

Um, let me disagree and just say that doesn't create monetary velocity, and thus inflation, it just shifts money around, and in many ways can't lead to inflation for the dollar because of other things going on internationally and domestically economically.

Certainly, the government can drive inflation, and may well do so based on the moves the current administration is making:

One is proposed higher taxes on corps, which will mean higher prices for the products corps produce. Another one is massive re-regulation, which will drive prices higher by increasing operating costs (e.g. the meat industry www.foxbusiness.com/... (Both are government fueled inflation, but not via spending.)

That said, there's a lot of things that are fighting inflation (concurrent printing by trading partners around the world, low yield on foreign bonds, technological innovation) and a lot of people have missed the inflation that has *already* happened in commodities.

I'm not worried about inflation but about stagflation a la the Obama gig economy era where working and middle class people had to work harder and harder just to stand still. Most Real Estate will perform fine in most scenarios including that one, but more so in the lower income manufactured housing $SUI areas and net leases $O in my opinion.
2bears profile picture
The labor market is not weak. Where I live in Indiana every factory, store and service business is looking for help and can't get it. Could this be because the government is paying people not to work? Everyone has plenty of money to spend by how busy the stores are.
they want people without criminal records who can pass a drug test, but they are already employed
REITs own multiple buildings, each building has a mortgage and lease that come up for renewal at different dates.

So when mortgage rates rise there is very little impact on most REITs since they have time to increase rents on many buildings before mortgages have to be renewed.

And when mortgage rates are increasing it generally means the economy and inflation are increasing, which boosts the market value of land and buildings.

So I can't understand why some well known market pundits are so much against REITs when mortgage rates rise. Am I missing something, or are they missing something?
@Robert in Vancouver I understand your point/question, but one thing to note is that most REITs do not put a mortgage on every building. Many properties are held unencumbered by a property level mortgage, and rather the REIT finances their overall obligations with cross collaterized loans, lines of credit, etc. Many REITs prefer long term fixed rate debt where they can lock that in.
Additionally, depending on the asset type, there can be multiple tenants in a given building and therefore multiple leases with expiration dates independent of each other. Having said that, I don't think that changes your point, that many REITs should be able to survive or thrive in a rising interest rate environment.
@Brad Thomas Tremendous article Brad. Most interesting was Chart 3, showing REIT returns vs. S&P returns in low, moderate and high inflation. I stared at that for a good while. If correct, a move from low to moderate inflation (which we may face soon) 1) gives REITs an advantage in total return over the S&P 500, from a similar return for both in low inflation, and 2) increases REITs' price return greatly over their low inflation price return, while maintaining or even slightly increase REITs' income returns. This is very counterintuitive to the argument that inflation pushes up interest rates, and the coupons on bonds, which make bonds more attractive and reduce the demand for REITs, causing them to stagnate or depreciate in value. The chart suggests that REITs do not lose income as rates rise, i.e., perhaps by offsetting increased interest costs with rent increases? A puzzle for me is that the chart suggests price return for REIT investors RISES as prices go up--so demand for REIT shares is increasing as this happens? Do I understand this right? How confident are you in the data? Any additional understanding would be much appreciated. Thank you.
Brad Thomas profile picture
@Catskills1 Thanks for reading and commenting... I am writing a follow up article and I will address these points... Are you a member at iREIT on Alpha.... What can we do to earn your business?

All the best. Brad
Brad, You mentioned nothing about mReits here. Your thoughts!
Brad Thomas profile picture
@dwillinlvill mREITs are "trading" vehicles IMO and when you combine that with leverage you get a speculative alternative. Overtime, equity REITs will most always outperform mREITs. - Thank you, Brad
@dwillinlvill Inflation hurts lenders and helps borrowers, but it really helps the owners of real assets. mReits borrow at low rates to buy higher yielding debt and mortgage backed securities, so mReits are both a lender and a borrower. eReits own actual properties.

I've heard gold bugs talk about gold as an inflation hedge because an equal amount of gold in the past would buy the same size house today, while many more dollars would be required to buy that same house over time. It seems to me that the gold bugs miss the point that the measure of value in that example is the house, not the dollar or the gold. So, real estate, or eReits should be an effective inflation hedge.
Just One Lab Nerd profile picture
Good article. I have had and held some FPI for years, and recently have been slowly adding in UMH and STAG. Any thoughts on HASI? Could see a surge if that stimulus package with all the green energy infrastructure support comes through.
Just One Lab Nerd profile picture
Never mind,... Just noticed your other recent article that included HASI. Cheers!
Brad Thomas profile picture
@Just One Lab Nerd We recently interviewed FOI's CEO at iREIT on Alpha (video)..... UMH and STAG and pricey....

I just posted this:

3 Strong Buys Poised To Profit seekingalpha.com/...
Good Article
Just what I have been worried about!
Am bookmarking
Thank You
careful investor 1 profile picture
Iron mountain has a declining business. We used to store files also. Now we store them digitally and frees up a lot of space
Brad Thomas profile picture
@careful investor 1 Declining business?

We're not talking about Blockbuster Video here...

Where else can you store your loan documents, precious art, medical files etc...

Before you say, the cloud....

IRM is investing heavily in digitization and data storage...

The perfect storm.... and AFFO is growing... not declining....

Long IRM
careful investor 1 profile picture
@Brad Thomas
Sorry but I respectfully have to disagree. FFO last 3 QTRS are .53,.61,.60.
They don't cover the dividend Their storage business is in decline and there are bigger and better players in digital storage. This is why I sold my position. I'd rather invest in a growing business and this is not it.
Brad Thomas profile picture
@careful investor 1 You're using the wrong metrics... you should use AFFO instead to get a more accurate picture of cash flow before dividends.
You don’t own O? Thanks for the article. Well written easy to understand.
Brad Thomas profile picture
@boog3 Thanks- Yes I own O.... must have missed that by mistake... All the best. Brad
Hungry for Knowledge profile picture
Ah yes, the perpetual Catch-22:
Too late to invest in mobile home parks, they're performing great!
Don't invest in $HT, too early!

I, for one, find that I have to be "too early" or else I miss it all.
I've been in $HT for months, up 100% (and my understanding is that it's a vacation-focused hotel REITs, in NYC / Orlando / Miami, etc.)

Love your work. Thank you as always.
Brad Thomas profile picture
@Hungry for Knowledge Thank you.... We plan to launch a REIT option service soon (at wide moat research dot com) and we will likely including lodging... Thanks for reading and commenting.. All the best - Brad
Anthonyhai2003 profile picture
But with Biden’s desire to raise taxes, I don’t know if economic growth that Powell wants to see, will be nullified in the next few years....
Brad Thomas profile picture
@Anthonyhai2003 Working on a tax article this week for iREIT on Alpha... come check out our marketplace service (2 week FREE trial)... All the best
Good Morning Brad,

Excellent discussion of an important topic that is on most REIT investors’ minds.

Have also been “nibbling” on triple net newbies like NTST. Maybe even a bigger nibble today with an expected price drop with the announcement of a secondary. Sounds like an opportune time to lower your cost basis. Hope it gives a better return than if you put your money on Gonzaga!

Warm regards,
Brad Thomas profile picture
@rsmab01 Wow. What a game... BAYLOR came out swinging! Thanks for reading, and yes, a good time to pounce on NTST! All the best. Brad
Rydercup2020 profile picture
@Brad Thomas you obviously meant Baylor.........must have had Butler on your mind. :)
eric2620 profile picture
@Brad Thomas Rydercup2020 beat me to it.
I see you do not list NTST as a long? Yesterday’s dilution have something to do with this?
Brad Thomas profile picture
@Jcraig304 I am long NTST.... I will edit that now... Thank you. Brad
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.