How The Fed’s Interest Rate Decision Impacts CRE

The Fed’s December 15-16 meeting brought an end to the speculation on interest rates. With the decision made to raise interest rates in 2016, several significant commercial real estate firms are sharing their insight on how the change will impact CRE. Per the decision, the rates are expected to rise each quarter of next year to reach 1.4 percent, and the commonly-held view is that there will be no major effect on the industry.

Seeking Alpha’s Stephen Adler reported that the gradual rate hike will not impact the industry, due to improvements in the economy. The expected GDP for 2016 is at 2.4-percent, up 10 basis points (bps) from the projection in September.

CBRE’s Spencer Levy, head of research for the firm, said that the endeavor “won’t have any impact on the commercial real estate markets, and that the Fed likely has significantly more room to move before we begin to see real pressure on cap rates.” But, he added that some markets could be impacted more than others, and that global politics, especially in China, as well as the cost of oil are wild-cards worth noting.

Meanwhile, Lee & Associates’ chief executive officer, Jeffrey Rinkov, believes that it was a “logical move by the Fed.”