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| Jeanne Peck |
Chicago, IL -- "The
Day the Rates Stood Still" would be
the title of a real estate
finance sci-fi thriller describing the state of
the capital markets. Over the past month, numerous trading days
resulted in
the same rates as the
previous days, a pricing pattern not seen anytime
earlier this year. The reduced rate volatility indicates the
markets
expect relatively modest
rate hikes in the next few months.
In capital markets awash
with investment funds, such conditions favor
tightening mortgage
spreads as rate-hike fears calm. The
overall flight to
higher quality, safer
fundings creates even more pressure to tighten spreads
due to the limited supply
of such lending opportunities. As the
domestic
economy keeps humming
along at the currently favorable pace, expect
long-term mortgage spreads
the investment-grade assets with lower leverage
to reach down toward the
100-basis-point range.
Today's lower debt costs
come as tremendous relief to the industry given numerous other issues
facing owners.
For example, in certain
pockets of the U.S. rents are difficult
to maintain [and increase] within the apartment sector due to the
onslaught of new supply. On the
commercial front, disruptive technologies
and changing consumer habits place relentless pressure on retail and
office properties to integrate bricks-and-mortar with
internet spending
habits.
As was a common theme at the
International
Council of Shopping
Centers' major RECon 2017 event, it is not a question of
retailers needing to sell
via bricks and mortar as opposed to online - the
question is how to
optimize using both! Finally, operating
expenses for all
property types are rapidly
escalating due to higher labor and material
costs. In the end, owners must allocate more funds
to operating, over and
above debt service.
Ms. Jeanne Peck of The
Real Estate Capital Institute, notes, "Steady debt
pricing is welcomed relief
for the industry. Instead of worrying
about
rising debt-service costs,
owners can allocate more spending on technologies
that improve income while
reducing expenses."
For a complete copy of the company’s news release,
please contact:
Jeanne Peck, Executive
Director
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