DALLAS-The training wheels are coming off the economic bike as the Fed begins its phase-out of quantitative easing this fall. Locally based Tom McNearny, chief investment officer at Transwestern, has just issued his Briefing, the National Economy at a Glance, in which he likens the “unwinding” of the government stimulus to a global tsunami and explains how that is “finally at the forefront of the capital markets discussion.”
In his report, he notes: “The landscape changed suddenly and dramatically when Ben Bernanke announced that the Fed would be maintaining its low interest rates indefinitely, but is expected to start removing the quantitative easing sometime late this fall with full anticipated phase-out by mid-2014.”
What does all of that mean for commercial real estate? According to McNearny:
- “CRE continues to provide an attractive return to both institutional and non-institutional investors. However, recent turmoil in capital markets is likely to create uncertainty about interest rates and cap rates.
- “The 10-year borrowing rate has increased from 3.75% to 4.75% in less than four weeks. At this level, financing is no longer accretive to 6.25% dividend for non-traded REITs.
- “A plunge in CMBS pricing has slowed issuance. Projections of total issuance for CMBS in 2013 are being revised downward from $100 billion to $70 billion.”
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John Salustri
John Salustri has covered the commercial real estate industry for nearly 25 years. He was the founding editor of GlobeSt.com, and is a four-time recipient of the Excellence in Journalism award from the National Association of Real Estate Editors.
