Chandan: Watch 10-Year Treasury Yields More Than Federal Funds Rate (VIDEO)

Although the Federal Reserve’s quarter-point increase in the federal funds rate certainly made headlines last week, it was hardly unexpected. Moreover, Sam Chandan, founding director of the Chen Institute for Global Real Estate Finance at the NYU Stern School of Business, told Connect CRE co-founder and EVP Sarah Quinn, “the implications for real estate are less to do with the very short term that the Fed exerts control over, and more the long end of the yield curve.” 

For real estate, then, “the bigger news over the last week has been the 10-year Treasury yield climbing up to about 5%,” said Chandan. “And, for a lot of people in real estate, that’s going to be the more relevant number when we’re thinking about debt yields, cap rates and borrowing costs.” 

The quarter-point hike may have come as little surprise to the commercial real estate industry in the context of what the economy and geopolitical events have brought this month. Viewed over the course of the year, though, it ran counter to what many in the industry would have predicted.  

“Certainly, there was an expectation on the part of some in the real estate market that we would see a meaningful decline in interest rates this year,” Chandan said. “That hasn’t happened. The circumstances currently don’t allow for it. ” 

In the video below, Chandan and Quinn also discuss the long-range outlook for CRE financing and refinancing, the European Union’s invitation to Canada for associate membership and the broader cross-border investment landscape, and the current trend of institutional investment in data centers and digital infrastructure.