HOW DID PAST INTEREST RATE CUTS AFFECT COMMERCIAL PROPERTY? CHECK OUT THESE SIX CHARTS

Costar

In this century, it has taken anywhere from 1 1/2 to 3 1/2 years for commercial property sales volume and prices to begin increasing following interest rate cuts. The way it all plays out, after the Federal Reserve's announced half-percentage-point cut in the past week, will depend on how far the central bank keeps trimming rates to get them closer to what the U.S. economy experienced over the past 14 years, according to industry professionals.

RETAIL CMBS LOANS BEHIND ON PAYMENTS RECEDE FURTHER

Costar

This decline in delinquent loans bucks the trend in the office, hospitality, and multifamily sectors. It has been driven by trends that include a limited number of loans falling behind on payments resulting from the post-pandemic surge in consumption, and low-vacancy space market conditions creating a more favorable operating environment for landlords. Just 6.5%, or $410 million, of delinquent retail CMBS loans were less than 90 days late on payments in July.

THE CAPITAL MARKETS: WHO'S STILL LENDING AND HOW

Connect CRE

Higher-for-longer interest rates, coupled with a pullback by traditional lenders, have led to a gap in borrowing. Debt maturities continue to raise additional concerns. Many sponsors wonder if they can find enough debt and equity to buy, build, rehab or refinance in the current environment. The answer is yes. Debt and equity can be found. While loan origination volumes aren’t anywhere near the frothy days of 2021 and 2022, experts told Connect CRE that there is capital to be had for many CRE projects.

INDUSTRIAL RENTS UP BY 7.3% DESPITE NEW SUPPLY PLAGUING LANDLORDS

Bisnow

In-place industrial rents rose in July to $8.15 per SF, according to a report from CommercialEdge. The 7.3% year-over-year increase is good news for landlords that have been coping with a supply surge, but the overall industrial market is still down from its record highs in 2022. Rent growth was greatest in the Inland Empire, Los Angeles, Miami and New Jersey, which saw year-over-year increases of 12%, 11%, 9.7% and 9%, respectively, according to CommercialEdge.

LIFE SCIENCES CHALLENGED BY OVERBUILDING

Globe St.

"It has become clear that developers over-responded to demand for lab space, leading to a supply glut in the sector," the report stated. "Breakthroughs in mRNA and CRISPR technologies, alongside record low interest rates, led to billions of dollars in funding from both private and public sources pouring into the life sciences sector. Developers rushed to respond, bringing millions of square feet to market in recent years through new developments and conversions of existing buildings."

FEATURED PROPERTIES

At Lee & Associates, our reach is international but our expertise is local market implementation. With offices across the nation and Vancouver, Canada, Lee & Associates is one of the largest and fastest growing commercial real estate organizations in North America. 

Founded in 1979, our experience and expertise offers extensive local market knowledge, seasoned agents, industry leading technology, and a commitment to achieving our clients long-term real estate goals and successes. Lee & Associates understands real estate and accountability, and provides an integrated approach to leasing, operational efficiencies, capital markets, property management, valuation, disposition, development, research, and consulting.

Commercial Real Estate Questions? 

Please Contact:

Steve Malley

smalley@lee-associates.com

858.453.9990

www.lee-associates.com/sandiego