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The non-nullable type is 'String' within parent type 'Content'","path":["readnext","contents",5,"uri"],"extensions":{"classification":"NullValueInNonNullableField"}}],"data":{"articleData":{"uri":"/2024/09/20/rate-reduction-roadmap-charting-cres-course-through-varied-forecasts/","canonicalUrl":"https://www.globest.com/2024/09/20/rate-reduction-roadmap-charting-cres-course-through-varied-forecasts/","generatedId":"fmj45fmekjg","naturalId":"blogAndPostId/blog/post/296-291763","type":"ARTICLE","postFormat":"news","kickerPresentedBy":null,"breadcrumb":[],"presentedBy":"","title":"Rate Reduction Roadmap: Charting CRE's Course Through Varied Forecasts","readtime":"3","timeToRead":"3 minute","prettyModified":"September 23, 2024 at 05:28 AM","prettyDateTime":"September 20, 2024 at 05:24 AM","needToKnow":[],"byline":"Erika Morphy","showDisclaimer":true,"authors":[{"name":"Erika Morphy","description":"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.","imageLarge":"http://www.almcms.com/contrib/content/uploads/sites/304/2016/01/Erika-Morphy_avatar_1454221855.jpg","webUrl":"/author/profile/erika-morphy/"}],"publication":"Globe Street","kicker":"Analysis","kickerNode":[{"name":"Analysis","slug":"analysis","uri":"/analysis/","sectionName":"Analysis"}],"prettyDate":"September 20, 2024","pubDate":"2024-09-20 05:24:42.000","modifiedDate":"2024-09-23 05:28:48:363","isDownload":"false","primaryCategory":{"channelName":"","sectionName":"","name":"","uri":"","slug":"","channelUri":""},"tags":[],"image":{"uri":"https://images.globest.com/contrib/content/uploads/sites/296/2023/06/Arrow-Leader-Article-202306210754.jpg","width":"620","height":"372","alt":""},"embed1":"","embed2":"","summary":"A look at where the federal funds rate and the ten-year Treasury might land.","categories":[{"name":"National","uri":"/markets/national/","channelName":"GlobeSt Market"},{"name":"Economy","uri":"/globest-topics/economy/","channelName":"Globest Topics"},{"name":"Midwest","uri":"/region/midwest/","channelName":"Region"},{"name":"Northeast","uri":"/region/northeast/","channelName":"Region"},{"name":"Southeast","uri":"/region/southeast/","channelName":"Region"},{"name":"West","uri":"/region/west/","channelName":"Region"}],"bodyArray":["<p>The Federal Reserve's decision to cut the federal funds rate by 50 basis points, bringing it to a range of 4.75% to 5.00%, marks the beginning of a series of anticipated rate reductions that are expected to significantly influence the commercial real estate market. According to projections from the Federal Reserve, two additional rate cuts are expected this year, with four more planned for 2025. Based on expectations for neutral policy rates, the Fed anticipates completing or nearing the end of its rate-cutting cycle by early 2026, as analyzed by Cushman &amp; Wakefield.</p>","<p>This forecast is in line with CBRE's prediction of 25 basis point cuts in both November and December, followed by an additional 125 basis points in reductions next year. The market has responded with caution; interest-rate futures contracts now indicate a 70% probability of a quarter-point cut in November, rising from 65% following recent economic data that showed an unexpected drop in unemployment insurance claims. The recent rate cut also decreased the Secured Overnight Financing Rate (SOFR) by 50 basis points. Assuming risk spreads over the base rate remain stable, floating rate debt has become less expensive, according to Cushman &amp; Wakefield. This reduction may assist some borrowers in finalizing deals and help others manage existing floating-rate debt&#160;<span style=\"margin: 0px;padding: 0px\">challenges</span>.</p>","<p>In terms of spreads, fixed-rate debt is currently priced at approximately 175 to 250 basis points over Treasuries, aligning with historical averages. The reduction in overall debt costs due to lower base rates aids the financial engineering of commercial real estate deals by restoring some neutral or positive leverage conditions for fixed-rate products relative to cap rates. Floating rate debt, linked to SOFR, remains priced in the 7% to 7.5% range but is expected to decrease following the rate cut. Cushman &amp; Wakefield noted that further rate cuts would be necessary before floating rate debt achieves neutral or positive leverage territory.</p>","<div class=\"paywall-content\"><p>Looking ahead, CBRE anticipates that the 10-year Treasury yield will remain below 4% by the year's end and settle in the mid-3% range throughout most of 2025. This outlook is more optimistic than Fitch Ratings', which projects the 10-year yield ending 2026 at 3.50%, close to its current level of around 3.70%. These rate cuts and lower bond yields are anticipated to positively impact commercial real estate. CBRE forecasts a 5% increase in annual investment activity this year, with further acceleration expected in 2025. Additionally, the combination of easier monetary policy and reduced borrowing costs is likely to stimulate investment and potentially enhance asset values within the sector.</p>","<p>The timeline for these effects depends on the pace of the rate cuts. According to Cushman &amp; Wakefield's analysis, it is widely believed that the neutral rate—where Fed policy neither restrains nor stimulates growth—lies between 2.5% and 3%. Although the federal funds rate has been reduced by 50 basis points, it remains significantly above this neutral range by about 175 to 200 basis points, which continues to suppress economic growth and consequently demand for commercial real estate space.</p></div>"],"slides":[],"video":""},"articlePackages":[],"youmightlike":[{"uri":"/2024/11/07/logistics-real-estate-faces-mini-cycle-of-subdued-demand/","title":"Logistics Real Estate Faces Mini-Cycle of Subdued Demand","byline":"Kristen Smithberg","prettyDate":"November 07, 2024","readtime":"3","image":{"uri":"https://images.globest.com/contrib/content/uploads/sites/296/2024/10/Industrials-warehouse-Article-202410041653.jpg","width":"620","height":"372"},"summary":"Subdued demand has persisted despite healthy GDP and consumption."},{"uri":"/2024/11/07/multifamily-outlook-brightens-while-office-questions-linger/","title":"Multifamily Outlook Brightens While Office Questions Linger","byline":"Kristen Smithberg","prettyDate":"November 07, 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