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Commentary

10-Year Treasury Note Hits 3% and Its Impact on Net Lease

With the risk-free rate moving up, investors will expect returns on their investments to trend in the same direction.

Jonathan Hipp

The 10-Year Treasury rate hit 3% this week, the highest it’s been in several years.  The hike in the 10-year will ripple through the debt market. Financing real estate will become more expensive, pushing up the cap rate ‘floor’ for investors using debt to acquire properties.

Higher rates are likely to affect all-cash buyers as well. The 10-year Treasury rate is commonly referred to as the risk-free rate of return. With the risk-free rate moving up, investors will expect returns on their investments to trend in the same direction. Average cap rates may not reflect this change immediately as the cycle of real estate transactions is much longer than trading securities. Properties with their price already negotiated are unlikely to be affected while properties currently or soon to be on the market are going to trade at slightly higher cap rates.

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Jonathan Hipp

Jonathan Hipp

Jonathan Hipp began his career in real estate over 25 years ago. In his early years as a broker, he ventured into the net lease industry and quickly began leading the US net lease market, closing over $3 billion in transactions. In 2005, Jon founded Calkain Companies, a company focused solely on net lease investment services. As President and CEO, he has been instrumental in building the firm into one of the leading Net Lease real estate companies, transacting over $12 billion of net lease deal volume over the past 13 years. He has expanded Calkain’s services to include brokerage, advisory, asset management, capital markets, and industry research. He has become a well-known resource, panelist, and speaker at various Net Lease and Industry conferences and is a regular contributor to GlobeSt.com on real estate trends. In June 2015, Jon’s passion for the real estate business was again recognized as he was nominated for the Top Real Estate Player in the DC area by SmartCEO magazine.

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