Fed’s Cut Transforms the CRE Investment Landscape
Fed Cuts Rates by 50 Basis Points
- The 10-year Treasury rose after the cut, but other Treasury rates continued to decline
- Different Treasuries may diverge in the short-term, but tend to move in the same direction over a longer time span
- Wall Street already priced in the Fed’s 50bps cut
Wall Street Expects Significant Cuts Moving Forward
- Investors eyeing for a recession, but most economic indicators remain positive
- Federal Funds rate projected to drop to 3% by late 2025
- Barring a recession, declining rates should provide tailwinds for CRE investment activity.
CRE Market Has Shifted Gears
- Rate cut expectations spurring aggressive bidding activity in several sectors and regions
- Many institutions are beginning to reengage with CRE
- Cap rates may begin to compress, but this depends on strong investor demand and ready access to debt capital
As of September 24
Fed funds rate forecasts based on midpoint of highest probability target range
Sources: Marcus & Millichap Research Services, Federal Reserve, CME Group
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