What the Latest Fed Meeting Means for CRE Investors

Investor Sentiment on the Rise in Latest Investor Survey

• Investor sentiment has fully recovered from the pandemic and reached its highest level since 2015
• Suggests elevated CRE transaction activity in 2022
• Inflation and rising interest rates are top investor concerns

Federal Reserve Takes Steps to Combat Elevated Inflation

• The Fed increased overnight interest rates 25 bps at meeting last week; Could raise rates 6 more times in 2022
• Fed will end Quantitative Easing this month after doubling balance sheet; Could shift to Quantitative Tightening
• These efforts are meant to create a rising interest rate climate, meaning cost of capital is expected to rise

Dramatic Interest Rate Rise Could Deter CRE Buyers

• A rate rise of 50 and 100 bps could result in 6% and 19% of respondents reducing their acquisitions, respectively
• The expected Fed increase of 175 bps could slow activity for half of buyers over the course of the year
• Buying now will help lock in favorable rates; Selling now will ensure the largest buyer pool to choose from

*As of 1H 2022
Sources: Marcus & Millichap Research Services, M&M/WMRE Investor Survey

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