WILL FED ACTION DISRUPT THE CRE MARKET

 

Will the Fed's Hawkish Policy Shift Disrupt the CRE Investment Market?

  • Elevated inflation is prompting the Federal Reserve to take a more hawkish stance in 2022

  • Fed already accelerated the pace of tapering and is signaling a rate increase in March

  • Additionally, quantitative tightening and 4+ rate hikes are now on the table for later this year

  • These actions will put upward pressure on interest rates, raising the cost of capital

  • This could narrow the yield spread between CRE yields and borrowing costs

  • A dramatic rise in interest rates has the potential to challenge CRE sales activity

  • Today, investors are aggressively pursuing CRE assets and prices for most propert types are rising

  • Investors considering selling an asset may want to get a Broker Opinion of Value (BOV)