A recent series of economic reports have dampened the chance of immediate Federal Reserve rate cuts. As a result, the yield of the 10-year Treasury has shifted into a big jump to 4.7% since Thursday, April 25. This is good for those lending money or investing in fixed income but bad news for CRE owners, investors, and developers.

It's not that the economic fundamentals are necessarily bad. As Roger Aliaga-Diaz, Vanguard global head of portfolio construction said in an emailed note on Friday, "[Y]esterday's weaker-than-expected headline number for first-quarter U.S. GDP overshadowed a strong underlying report, with continued robustness of organic drivers to growth such as consumer spending, business capital expenditures, and housing. We continue to foresee full-year 2024 growth at least slightly above trend."

But there is more going on. "Sticky core inflation as reflected in today's Personal Consumption Expenditures index reading for March underscores Vanguard's belief that the Federal Reserve may find it's unable to cut interest rates this year," Aliaga-Diaz wrote. "We've long held that the neutral rate of interest—the theoretical rate that neither stimulates nor restricts an economy—is higher than many may believe. The ultra-low interest rates of the pre-COVID era are history."