Real Estate Capital Scoreboard® – September, 2018

Chicago, Illinois, September 3, 2018 – With inflation progressing slightly above the 2%-mark and the domestic economy showing uninterrupted growth, the Fed is expected to raise rates one or two more times by yearend. That said, benchmark ten-year treasuries are stubbornly low, at levels consistent with late spring/early summer. Mortgage spreads are also flat, translating to interest rates typically in the lower 4% range for floating-rate loans, and approximately 4.5%-to-5% for fixed-rate debt.

With mortgage rates predicted to reach higher levels combined with ongoing new construction supply, buyers take a cautionary wait-and-see attitude towards select multifamily, lodging and industrial deals. The retail property sector still is bargain-hunter’s turf, while office deals remain selectively targeted. As a rule, infill deals of various property types are in highest demand, while value-pricing typifies suburban assets.

As investors get a better grip on supply/demand dynamics and interest rates, pricing uncertainty prevails. As such, fresh acquisition financing activity is limited, and refinancing and takeout loans represent the bulk of debt volume.

John Oharenko, director of The Real Estate Capital Institute’s®, suggests, “As summer ends, expect more pricing discovery for both debt and equity deals. More attractive pricing may be on the horizon for patient investors.”

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