Understanding Commercial Real Estate Interest Rate Trends

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Interest rates continue to have a major impact on Commercial Real Estate in 2017. For one, The Federal Reserve raised short-term interest rates for the third time in just six months. The quarter-point move boosted rates to now range between 1% and 1.25%. But in order to build business and propel economic growth, investors and developers in commercial real estate need to understand the trend for increasing interest rates.

Where The Economy Stands

Since the 2017 election, it seems the financial market has been an utter whirlwind. Yet, the economy remained fairly stable during the President’s transition into office. While the economy grew steadily over the last eight years, Deutsche Bank predicts that if this continues, this could become the longest period of economic expansion in history, surpassing the record set from 1991 to 2001.

In May 2017, the unemployment rate reached a 16-year low, hovering around 4.3%. Christopher Macke, the Managing Director of Research and Strategy at American Realty Advisors, believes that what happens with wage and employment growth is more important than another spike in interest rates. A strong economy is best represented by maintained employment growth and wage growth increases. Macke goes on to explain that “whether or not the administration is able to get the significant fiscal policy implemented” is critical for economic growth.

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