BOSTON, MASSACHUSETTS (September 26, 2022) – Michael Chase, senior vice president/managing director of Northmarq’s Boston debt/equity office, shared his industry insights in a recent article published by ConnectCRE titled “The Fed, Funds and CRE Financing.”
The story highlights the impact Federal Reserve rate hikes, which began in March 2022, have had on commercial real estate financing. It was noted that while the Federal Open Markets Committee’s actions are pushing yields upwards on U.S. Treasuries, short-term rates have been impacted the most.
“This means borrowers seeking short-term floating rate or construction financing are finding it relatively more difficult than those seeking long-term financing,” said Chase.
Nor is it rising rates that are the problem. “Uncertainty leads to volatility, and this impacts transaction volume by making investment decisions difficult, and driving a wedge between buyers and sellers,” Chase said. This, in turn, impacts asset valuations. “Certain types of financing will remain more challenging, until there is a decrease in market volatility,” Chase added.
But all isn’t necessarily gloom and doom. Chase, for one, explained that asset types like multifamily and industrial will probably remain the favorite of lenders and investors due to demand and market rent growth. Furthermore, multifamily can likely count on financing from Freddie Mac, Fannie Mae and FHA , he said.