Rate Hikes Demand Watching, Not Fear

Growing up as a child of the ‘70s, I remember the mascot of a famous magazine (Namely, “Mad”) proclaiming in every issue: “What, Me Worry?”

That old catchline came back to me when I saw reports that the 10-year Treasury has increased to a one-year high of 1.6 percent. But, frankly, some of the reaction has been as unnerving as the rate hike is supposed to be. Case in point: here’s the CNBC market headline, “10-Year Treasury Yield Jumps to a One-Year High of 1.6%, a Rapid Move That Unnerves Investors.” 

Well, don’t go hiding under the covers quite yet. Yes, it’s a significant movement, for the net lease market as well as for commercial real estate investments as a whole. But we’ve faced much worse news in the past 12 months, so I think we can deal with an interest-rate hike. Unlike the disruption of COVID, when it comes to rate hikes, well, been there, done that.

I can understand investors with pending deals wanting to push them over the finish line and preserve their rate lock. And, indeed, some of our clients are asking for just that and looking for our guidance on future deals.

My guidance is as follows: What, Us Worry? I’m not trying to be blasé or flip here. But doom-and-gloom headlines aside, savvy investors are watching the movement of rates, with an eye to potential caution. But those same investors understand that caution doesn’t mean grinding all activity to a halt. It means only weighing deals in light of potential changes in the rates and anticipating the risk/rewards therein. 

So, simply put, keep your collective eyes on the prize, while always watching the movement around you, be it interest rate changes, shifting competition or changes in sector dynamics. As regular readers know, we’ve written much in this space on the net-lease sectors that are performing strongest as well as those that demand more careful scrutiny. But never have we yelled, “Halt!”

Worry in markets like these is the refuge of the uninformed.