Fed Response To Inflation Could Impact CRE Sales Activity
Rising Inflation Prompting Fed Action
- The Fed took major actions to avoid a recession; while the worst was avoided, rising inflation is now a concern
- Now, the Fed is reversing course by reducing Treasury purchases and potentially raising overnight rates
New Monetary Policy Could Shape Investment Climate
- Higher interest rates would push up cost of capital; rising interest rates not guaranteed to increase cap rates
- Elevated capital liquidity creating aggressive CRE bid climate, putting downward pressure on cap rates
- Rising costs and lower yields could slow transaction activity, impacting CRE prices and cap rates
What Should Investors Keep in Mind?
- CRE remains a great investment to offset inflation
- Major action by the Fed could influence interest rates and CRE pricing
- Investors considering buying or selling should understand the opportunities available and how they may change
*Through December
Includes apartment, retail, office, and industrial sales $1 million and greater
Sources: Marcus & Millichap Research Services, CoStar Group, Inc., Real Capital Analytics, Federal Reserve
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