The sudden war between Russia and Ukraine has pushed the international community into turmoil. Several countries have openly criticized Russia and put economic sanctions on the country as a response. The resulting reaction has left the global economy in chaos and affected several industries, including commercial real estate.

The industry had yet to stabilize post pandemic’s impact on the economy, so the way has added to the uncertainty. This blog will explore how the Ukraine crisis has affected commercial real estate to help you make the right investment decisions.

The Ukraine Crisis and Commercial Real Estate

The war between Russia and Ukraine started in February, but neither side has given any indication of the conflict coming to an end despite negotiations. Meanwhile, the global economy has taken a hit because of how the war has spilled over to the remaining countries.

Following are the primary ways in which the Ukraine crisis will affect the international commercial real estate market:

1. International Investment

Several European, North American, and Asia Pacific countries have imposed sanctions on Russia for waging an unprovoked war on Ukraine. These sanctions also apply to several Russian oligarchs due to their close ties to the Kremlin, and the decision has led to a significant crisis for commercial real estate.

Several wealthy Russians have extensive commercial real estate investments in Europe and the US and are actively invested in both markets. The decision to sanction and cease their assets has affected transaction volume and value, slowing the growth down.

The sanction is likely to remain active for the foreseeable future, so there is uncertainty over when things will return to normal.

2. Rising Fuel and Cost

40% of the EU’s gas imports were being sourced from Russia before the war started, which has left European countries in turmoil politically and economically. Russia has begun restricting that supply in response to sanctions, which has led to a disparity in supply and demand, causing inflation to shoot up.

The US has fuel reserves to rely on, but the sudden reduction in supply from Russia led the local prices to increase. Several related industries, like construction and transportation, have been affected, leading to fluctuating prices for commercial real estate.

3. Rising Uncertainty

Uncertainty is generally bad for any economy and often pushes stock markets into decline. The war has led to increased tension, and it is unlikely to dissipate even if the violence ends.

Countries will likely continue to remain hostile for some time, which means the global economy and industries will take time to recover. Hence, commercial real estate transaction trends may remain slightly uncertain for a few quarters.

Final Thoughts

In a nutshell, the Ukraine crisis has destabilized the commercial real estate industry in the US to some extent, and it will require expert analysis to make suitable investments.

Please contact our team to invest in commercial real estate in Rio Grande Valley. We have several years of experience and will help you make profitable choices.