STUCK IN SECOND GEAR: WHY CRE IS MOVING FORWARD

BUT CAN'T REV ITS ENGINE

Big-picture summary

At the start of 2025, financial experts predicted interest rates would fall quickly toward 3.6%. Instead, long-term rates have remained around 4.5%. Commercial real estate is moving forward, but higher borrowing costs mean sponsors must adjust their capital plans to a higher-rate environment.

• Wall Street expected rates to fall approximately 1%, but actual rates remained nearly 1% higher.
• May 2025 marked a significant separation between actual yields and the original forward curve.
• Federal Reserve cuts to short-term rates did not bring down the 10-year Treasury.
• Sponsors should underwrite acquisitions and refinancings around a 4.25%–4.75% Treasury environment.

With borrowing costs likely to remain elevated, lender selection, loan structure and execution have become increasingly important. Contact John B. Levy & Company to discuss your financing needs.

John Levy (804) 500 9025 | jlevy@jblevyco.com

Sandler Passman (804) 500-9033 | spassman@jblevyco.com

Bram Levy (804) 500-9029 | blevy@jblevyco.com