Treasury yields have declined significantly recently, with the 10-year hitting a 5-month low of 1.18% this week, down from 1.42% last week and after hitting 1.74% in March. The recent decline is being attributed to jitters about the delta variant of Covid-19. The decline in treasury yields – assuming it doesn’t reverse direction - will keep pressuring interest rates lower for commercial and multifamily loans. 

Further supporting the expectations for continuing low-interest rates and a favorable loan market is that:

• Bank aggregate loan originations have substantially lagged the growth of deposits. Some banks have started to address this by an aggressive push to grow their real estate loan originations, primarily through lower interest rates.

• Fannie and Freddie Mac loan originations have been very slow relative to their annual caps. They will need to substantially step up their originations – presumably through more aggressive pricing – to meet their annual targets. One step they have recently that will improve their competitiveness is that they have recently stopped requiring the additional debt service reserves they imposed due to Covid-19.

• Private lenders have returned to the market with aggressive leverage and pricing for both bridge and construction loans. The number of participating lenders and their aggressiveness for each such loan have increased materially from early 2021. Several lenders have recently mentioned that the loan market is much more highly competitive than usual.

Anecdotally, we’ve seen the competitive lending market translate into some very favorable loan terms for specific opportunities, including:

• Non-recourse construction loans with sub-8% interest rates and leverage generally around 80% LTC

• Bridge loans on nearly-stabilized properties with interest rates in the low 3% range

• Bridge loans on far-from-stabilized properties with interest rates in the high 3%/low 4% range

• Fully-leveraged permanent loans fixed for five years at 2.65% or even 2.5% with moderate leverage

As always, we are available to discuss the real estate capital markets generally or more specifically with respect to a particular asset. Please feel free to reach out to us at any time!

Investors who are worried about inflation eroding the value of their income should look into real estate investment trusts.

As the U.S. continues climbing back to pre-pandemic economic activity, inflation has been on the minds of investors. A key inflationary measure — the core personal consumption expenditures price index — rose 3.4% in May from a year earlier. Another gauge, the consumer price index, also jumped last month to 5% over the same period.

Federal Reserve officials view the jump in prices as transitory. REITs are less impacted by inflation. The average dividend yield on REITs is in the neighborhood of 3%, according to May data from industry group NAREIT. That compares to the 1.5% yield on the bellwether 10-year Treasury bond.

To learn more about REITs inflation protection and what that looks like for your investments, click the link below.

With hundreds of millions of workers around the world being encouraged to work from home indefinitely, many felt the long-term impact on both the commercial office space market and city center retail would be potentially devastating. 

Now, as economies begin to recover and workers return to the office – but in new and more flexible ways – there is a growing realization: New technology is set to reshape the way the industry operates and ‘proptech’ is taking on a crucial role as the real estate industry emerges from the pandemic.  

Click the link below to learn how technology and Real Estate Investing are working together for a better - and greener - future.