As most of the industry will tell you, the greatest challenges facing the commercial real estate sector today largely stem from the Federal Reserve's aggressive rate increases during the past 15 months, according to John Chang, client services, Marcus & Millichap.
And while many CRE professionals have become personally and painfully aware of the knock-on effects this monetary policy has had, it can be helpful to see them enumerated and explained to help plan strategy.
Simply put, because the Fed pushed the overnight rate up by more than 5% in such a short time, the cost of debt capital increased, distress risk was created, investors began pulling capital out of the market and into bonds, lenders initiated tighter underwriting and debt capital shrank.
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