Commercial Real Estate Industry Dampened by Inconsistent Interest Rate Messaging
NEVBEX Staff 
Credit: American Nevada Company
The federal government’s mixed statements surrounding interest rates have put a damper on the momentum of commercial real estate trading.
Marcus & Millichap’s CEO, Hessam Nadji, recently discussed the effect of the Fed’s vagueness regarding interest rates during an appearance on Yahoo! Finance. Nadji stated private individual investors, high-net-worth investors and small partnerships are sensitive to interest rates and will wait to sell until favorable values are in place. He also stated these investors own the vast majority of CRE.
Nadji urged the Fed to be clearer in its messaging to give investors a stronger idea of how the market is moving. Currently, it appears as though inflationary caution is beginning to wane, but the pressures are still there.
Values peaked in March 2022 and have been coming down since then. Currently, many investors are paying cash to secure select properties and are waiting for interest rates to come down before financing projects. Nadji also cited the 10-year Treasury’syield increase to 4.5% as altering the market’s sentiment.
Nadji described market optimism surrounding corrected valuations, steady and stable job growth and limited supply. He also pointed out new developments and construction are expensive, so the supply industry has been cooperating more with developers.
Nadji also touched on the potential impacts of President-elect Donald Trump. A large deportation effort could impact Class B and C markets and workforce housing rentals, which are heavily occupied by immigrants. A mass deportation effort may harm the construction labor force throughout the country, and tariffs may balloon pricing for construction materials.
Nadji claimed retail and apartments are prospering, while office space is continuing to struggle. Optimism in the retail sector is reportedly at a 20-year high, as consumers have returned to stores. Affordability is at an all-time low, which results in a stronger demand for rental properties and apartments. (Source)
