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RCA’s CRE Economist Puts Market Turbulence into Perspective
The recent turbulence in the market, stock market volatility, rising interest rates, bankruptcies and fears of inflation prompted us to ask: What does it all mean for the commercial real estate industry? Real Capital Analytics’ CRE Economist Jim Costello weighs in with his analysis of what’s going on and its expected impact.
Really, no one knows. The increases in the 10-year UST should add volatility to the market for a bit, as everyone tries to figure out where things will shake out. Could we have a 600-point increase tomorrow?
In terms of the impact on CRE, it will take time. Remember, deals take maybe 20 weeks to close. Deals underway now may go forward easily if they have tied up debt already with rate locks.
For the ones that have not, the SOFR has been pretty stable since the end of September. It had bottomed out at 1.92, went up to 2.25 and slid slowly to 2.15. So what, 25 bps increase in the benchmark rate for lending. IF lenders keep their spreads constant that seems manageable.
I would expect though that if this turbulence in the stock market and the 10-year UST continues, that the pace of deal volume would slow into the big year-end Q4 deal season as turmoil always leads to some caution.
Don’t miss Connect National Investment & Finance on Oct. 18 to hear what industry leaders and major stakeholders have to say about the state of the market and what’s next in this current cycle. Click here to register.
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