The humanitarian, social and political crisis unfolding in Ukraine has begun to deliver some economic fallout in both global and United States markets. Oil prices have surged, the stock market moved into correction territory and a flight-to-safety pushed interest rates lower. As the war plays out over the coming days, weeks or perhaps months, a wide range of economic consequences could emerge. Setting aside worst-case scenarios, the war in Ukraine likely holds little direct risk to U.S. commercial real estate. Although some ripples will likely be felt by investors, hard assets have historically demonstrated durable results in times of turbulence and uncertainty.
Commercial real estate offers long-term durability. The war in Ukraine will remain fluid, and even after the invasion ends, there will likely be considerable geopolitical instability across the region. Allegations of war crimes, potential radiation hazards, the displacement of millions of people and the destruction of entire cities will impact the global economy and political landscape long after the shooting stops. While there are some upside scenarios, downside risks are far more numerous and broad reaching. Countless scenarios could create financial market instability, surges of inflation, a recession or a rapidly shifting economic climate. Within that context, commercial real estate is one of the few investments that usually generates reliable returns. U.S. real estate, in particular, is recognized by many international investors as a “safe-haven” during times of turbulence, and the flow of capital from overseas may rise in the coming months. Domestic investors may also shift allocations from other investment vehicles to capitalize on the durability of commercial real estate.