Rising Interest Rates Pose Vulnerabilities for CRE Market
2 min read
For many, the recent increase in interest rates did not come as a surprise. Altus Group's investment trends survey participants predicted an uptick of 75 basis points (bps) and anticipate a further increase before the end of the year.
Across 126 investors, developers, lenders and brokers who participated in the survey, many concluded that a recession might be on the horizon. The survey states, "Respondents overwhelmingly indicated that they believed cap rates would increase for office and retail assets in major urban and secondary markets due to rising interest rates. They also agreed that assets in secondary markets are more vulnerable to rising cap rates due to increases in interest rates."
Below is a summary of the survey's key findings:
90% of respondents foresee higher cap rates on office assets in major markets
97% anticipate higher cap rates on office assets in suburban and secondary markets
41% predict stable cap rates for industrial in major markets
37% indicate regular cap rates for multifamily in major markets
80% anticipate rising cap rates on retail in major markets
95% expect rising cap rates on retail in secondary markets
Only time will tell the actual impacts of rising interest rates on the economy and the commercial real estate market. Read more about the Altus Group's key findings and predictions here.
Reference
Rising interest rates alter slant on CRE values. Remi Network. (2022, September 8). Retrieved September 13, 2022, from https://www.reminetwork.com/articles/rising-interest-rates-alter-slant-on-cre-values/
Chief Investment Officer, Westhaven Group
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