Experts in the commercial real estate (CRE) sector have noted that the Federal Reserve’s recent increase of its Effective Federal Funds Rate (EFFR) has impacted CRE transactions. This raises questions about how institutional investors will adjust their strategies for investing in CRE.
David Fletcher, Excelsa Properties’ Managing Director and Head of Acquisitions, believes insurance volatility and inflation uncertainty remain overhangs among institutional buyers. Grant Jenkins, Staghorn Capital’s Managing Director, said many are opting for shorter-term fixed-rate financing options rather than traditional 10-year fixed money to accommodate current interest rate environment. Brook Scardina from Oak Real Estate Partners added that more capital is being directed towards alternative assets such as private debt and private equity funds to enhance diversification while optimizing portfolio performance objectives with low correlation to broader financial markets.
Jonathan Needell from Kairos Investment Management Co., however, believes most investors are waiting to see what happens with interest rates before acting on investments opportunities; they don’t want miss out on much if they wait it out longer term. Jenkins also pointed out that higher interest rates may make it difficult meet desired lending leverage which could require more equity than previous years; a situation he finds interesting over the next two or three years
