Interest Rates Are Everything

Ethan Penner speaking at RSLA.

LOS ANGELES—Twenty years ago, interest rate predictions were never a topic of discussion in commercial real estate circles, and that it was because they were impossible to predict. Today, it is just the opposite, with CRE experts regularly discussing where interest rates are heading. This dichotomy was the topic of keynote speaker Ethan Penner’s, founder and managing partner of Mosaic Real Estate Investors, kickoff speech at RealShare Los Angeles yesterday,

“Interest rates are everything,” Penner said in his speech. It is the measurement of how we drive relative financial assets, and real estate is a financial asset.” He focused the whole speech on a single slide, a 100-year graph of the 10-year treasury. The chart, he said, tells many stories and shows long-term economic trends in the market. Most specifically, that interest rates have historically been between 2% and 4%, with the exception of a long-term period of inflation in the 1970s, and Penner believes that interest rates will once again return to a pattern between 2% and 4%.