What is the effect of the current interest rate on the Commercial Real Estate industry?

Commercial Real Estate Interest Rate Update – June 2021

June 3, 2021

With the COVID-19 pandemic seemingly winding down throughout the United States, it feels like the economy is heading back to pre-pandemic activity and employment levels. Along those lines, recent statistics are showing increased signs of inflation. Many prognosticators have discounted these signs, pointing out that they are temporary in nature and caused by things like the spike in the price of lumber and the increased price of oil (known to be volatile).

What is the 10 year treasury rate for June 2021?

Over the past few months, the 10-year Treasury (US10Y) rate has remained relatively steady. The US10Y tends to be the “benchmark” index for most long-term fixed-rate loans. The US10Y closed today at 1.63%, an increase of only 0.03% from its closing of 1.60% 30 days ago.

How does the current treasury rate affect commerical real estate?

The market is clearly discounting signs of inflation as short-term trends. Market participants also have trust in the Federal Reserves‘ transparency of monitoring and acting on potential inflation. According to a 6/2/21 article in Bloomberg written by Matthew Boesler, “The U.S. central bank is currently buying $120 billion of Treasury and mortgage-backed securities per month as part of the policy program it put in place last year in response to the pandemic. Fed officials have said they will begin scaling back the purchases when the economy has made “substantial further progress” toward their goals, a condition many Fed-watchers believe will be met later this year.”