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Lisa Pendergast from the Commercial Real Estate Finance Council indicated that the chances of further rate cuts in the near future are “not very good,” reflecting the current economic climate.
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L.D. Salmanson, CEO of Cherre, highlighted the Federal Reserve’s caution due to lingering inflation concerns, citing the post-pandemic surge to 9.1% as a cautionary tale. He suggested that only significant leadership changes at the Fed could alter this cautious approach.
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Borrowing rates currently hover between 5.5% and 7%, complicating refinancing and new development projects.
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Pendergast pointed out that large CMBS deals are often extended rather than refinanced, creating a market “pile-up.”
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Salmanson noted that high cap rates around 7% are inhibiting development, advocating for a decrease to the 4-5% range to stimulate growth.
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The combination of high financing costs and declining cash flow is described as a “double negative” by Pendergast, where asset values decrease while the debt remains constant.
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Salmanson suggested that stricter immigration policies could increase labor costs, potentially exacerbating inflation.
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Pendergast expressed optimism that a Trump administration might foster a more business-friendly regulatory environment, potentially alleviating some of the regulatory pressures seen under the Biden administration. This could include deregulation efforts that might ease project approvals and reduce development costs.
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Sarah Hawkins from Hines highlighted an uptick in demand for CMBS deals, indicating a revitalization in debt markets.
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PwC’s Ricardo Ruiz and Bill Staffieri expressed confidence in an increase of capital investment into CRE, which could drive further industry activity in 2025.
