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What the 5th Fed Rate Increase Means for Investors

September 26, 2022 by Marcus & Millichap Research Services

How FED Rate Hike Impacts the Commercial real estate outlook

Takeaways From September Fed Meeting

  • The Fed reiterated its commitment to preserving stable prices and moving inflation back to 2.0%
  • They raised interest rates 75 basis points, projected another 125-basis point rise before the end of 2022
  • Indicated a 4.4% unemployment rate may be needed to balance the labor market and control inflation

Why Rising Rates Matter For Investors

  • Rising capital costs are squeezing levered yields; buyer underwriting becoming increasingly conservative
  • As market recalibrates sellers must review market pricing to align with buyer expectations

How This Impacts Commercial Real Estate Transactions

  • Expectation gap emerging between buyers and sellers
  • Recalibration of the transaction market is needed for buyers and sellers to reach market clearing sales prices

*Through September 22
Includes apartment, retail, office, and industrial sales $1 million and greater
Sources: Marcus & Millichap Research Services, CoStar Group, Inc., Real Capital Analytics, Federal Reserve

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Filed Under: Research Brief

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This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Any projections, opinions, assumptions or estimates used herein are for example purposes only and do not represent the current or future performance of the property. Marcus & Millichap Real Estate Investment Services is a service mark of Marcus & Millichap Real Estate Investment Services, Inc. © 2020 Marcus & Millichap and Limon Net Lease Group

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