Party’s Over: Rising Interest Rates Crash CRE’s Covid Recovery

I think the following raises some excellent points about rising interest rates. I’ve included a few of the highlights for you to get the gist of the article:

"Rate hikes are making borrowing more expensive, complicating deals and pressuring owners

In June, the Fed raised interest rates by 75 basis points, the largest such increase since 1994. Economists expect similar hikes to follow in July and September.

Higher rates mean that financing becomes more expensive, which in turn means that property owners have to extract more money from their buildings to cover costs. At the least, it’s making sales more complicated, with all sides changing things around on the fly.

“There are certain transactions I’m working on where retrades haven’t been done yet but we’re totally expecting it,” said Andrew Sasson, a broker at Ackman-Ziff. “Lenders are re-trading on pricing to borrowers in the midst of transactions.

The big chill

As rates rise, dealmaking has slowed.

Across the country, sales of commercial properties fell 16 percent annually to $39.4 billion in April, according to MSCI Real Assets, declining for the first time in more than a year.

A wave of maturing office debt will further test the market, as owners may find that they can’t borrow as much as they did previously to repay their loans.”

What do you think? Maybe you’d like to read on? Check out the full version here then give me a call at 646-494-4353 or send me an email at david@realestateinsurance.us to discuss how this might impact your own business.