Iran Shock Upends Real Estate’s Long-Anticipated Recovery

Four years after Russia’s invasion of Ukraine brought real estate’s decade-long party to a sudden halt, another war about 1,600 miles south is now threatening to choke off the recovery investors have been anticipating ever since.

The US and Israel’s attack on Iran has sent energy prices soaring, heightening risks for an industry where valuations are hypersensitive to interest rates. A sustained conflict means faster inflation feeding through to borrowing costs. Even before the war broke out, buyers appeared unmoved by the investment case for commercial property despite a combination of tailwinds: rates that until this month had gradually been dwindling; a clear lack of supply; and, rents that are broadly on the rise.