WALNUT CREEK, CA—As discussed in the Paramount Capital's monthly newsletter, View of the Market, relentlessly, the historical cap rate compression that has occurred in the CRE industry during the last few years. However, the firm's executive managing director, Joseph Ori, says in the exclusive commentary below that with the Trump election faster economic growth and inflation will be expected, both of which will force interest rates higher.
The views expressed below are the author's own.
During the Obama administration, the average GDP growth has been about 1.9%, one of the worst in the last century. If growth can be increased to a more normal 3.5% to 4.5%, the economy will boom and commercial real estate along with it. We could see the 10Y-Note increase from a current 2.3% to 3.5%-4% in the next few years. If this occurs, CRE investments and valuations will be negatively affected. Investors who bought property at low cap rates in the 4% area during the last couple years may have to sell into this higher interest rate environment and this could crimp returns.
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Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
