Fed Moves Pose No Threat to CRE
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Hughes: 10-year Treasury yields remain low.
CALABASAS, CA—Despite frequently voiced industry concerns that an interest rate increase will put a damper on values as well as sales activity, Marcus & Millichap doesn’t see the eventual increase disrupting the real estate markets. For one thing, the short-term federal funds rate, which relates mainly to consumer debt, is not the same thing as the longer-term benchmarks that govern commercial real estate lending and valuations.
Most commonly, the longer-term rate is the 10-year Treasury, which doesn’t move in unison with the federal funds rate, according to a special capital markets report from MMI. “Many factors, including equity market volatility and investors’ demand for risk-free investments, affect the level and direction of the 10-year Treasury yield,” the report states. Furthermore, says William Hughes, SVP of Marcus & Millichap Capital Corp., “The 10-year Treasury ended the third quarter in the low 2% range, held down by rising demand for low-risk, fixed income assets.”…
