Interest rates that will apparently be higher for longer. Lending that has dropped nearly 50% from last year. Plummeting valuations. Everywhere you look, there is pain for the CRE industry. By now we understand the path that got us here. The only question executives want answered is when will it end.
BGO's Chief Economist Ryan Severino has his thoughts on the matter.
It will come down to inflation and the Fed, he says. "If the Fed can be patient and let inflation return to target without further hiking, then empirical research shows that historically CRE returns should revert into positive territory. Over the last 6 business cycles, once the Fed stopped raising rates, CRE returns rebounded – cautiously at first but gaining notable momentum after only a couple of quarters.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
