TAG Industrial Watch: February 15, 2025

Last summer, when most experts celebrated as the Consumer Price Index (CPI) decelerated month after month, TAG warned that “the only thing transitory may be the current disinflation.” Since slowing to 2.4% in September, the annual increase in the CPI has indeed steadily moved away from the Federal Reserve’s goal of 2.0% to 3.0% as of January. As TAG pointed out then, the CRB Commodity Index is now up over 20% year-over-year, suggesting that consumer prices have much more room to rise. With the previous Fed rate cuts failing to lower mortgage rates and “sticky” inflation giving the Fed reason to pause further rate cuts, the possibility of higher rates for longer is becoming a reality. For industrial investors, high interest rates, reaccelerating inflation, and decelerating rent growth should all reinforce the need to acquire specialized assets. With the ability to increase rents with little fear of losing the tenant, landlords of specialized assets will be in a position to maintain or even enhance the value of their properties.

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