The Federal Reserve raised interest rates 25 basis points, but signaled that the rate increases may slow down as the central bank fights to keep inflation in check.
According to the Commercial Observer, Thomas LaSalvia, a senior economist at Moody’s Analytics who specializes in commercial real estate, said he is hopeful that a stoppage in the Fed’s rate hikes will help jump-start an investment sales market that has been largely stalled amid uncertainty about where borrowing costs would end up.
“If they get a sense that the rate hikes are largely over we might start to see the math starting to become a little clearer for deals out there,” LaSalvia said. “We’re not going to see the floodgates open for transactions, but it does allow more certainty in the math for transactions going forward.”
Also in the article, Sam Chandan, director of New York University’s Chen Institute for Global Real Estate Finance, noted that while the CRE industry is still contending with high borrowing costs and tighter credit conditions coinciding with recent regional bank failures, a stop in the rate hikes will bring some relief.
“The market will be able to navigate in an environment of rate stability, which is different from an environment in which with each subsequent meeting rates are going up,” Chandan said. “While being at or close to the peak in the rate cycle presents challenges for the industry, we can take some comfort in the likelihood of rate stability over the course of 2023.”