Steven Kohn. president of equity, debt & structured finance for Cushman & Wakefield

NEW YORK CITY—Likely rising interest rates and trade wars aside, the commercial real estate investment remains attractive, according to brokerage firm Cushman & Wakefield.

Cushman & Wakefield in a Capital Markets Update released today states that the markets are confident the Federal Reserve will raise interest rates again this year, particularly as long as the economy stays healthy.

The report, co-authored by Steven Kohn, president, equity debt & structured finance for C&W and Christopher Moyer, EDSF managing director, states that the markets are pricing a 96% chance of an increase in September and a 64% chance of another interest rate increase in December by the Fed. They note that Libor has started to climb as the finance markets enter a 30-day window before the next Federal Open Market Committee meeting (Sept. 25-26), C&W expects Libor to settle at around 2.30% by this time next month.

“Despite some recent volatility in treasuries as a result of a number of global risks, including emerging market worries, widening trade disputes, and hints of cooling growth in China, the commercial real estate lending market remains very borrower friendly,” the C&W report states,

Five-year and 10-year (AAA-rated) CMBS spreads remain in the mid 40s and mid 80s, respectively, and have been there for most of the year. Cushman & Wakefield notes that there has also been an increase in full-term interest-only loans from CMBS lenders from 42% in 2017 to 56% year-to-date.

“As we approach the fourth quarter, insurance companies that are ahead of allocation are becoming more selective, but the bank market has been more aggressively pursuing seven- to -10-year loans to take advantage of the void,” C&W states.

C&W Research in its recently released Capital Markets MarketBeat report noted that in the first two quarters of this year there was a modest increase in transaction activity, but the brokerage firm predicted that it does not expect any acceleration, which will lead to a slight decline projected for the full-year of 2018.

With the economy posting 4.1% real GDP growth in the second quarter of this year, along with other bullish economic data points—unemployment at near all-time lows and inflation that remains contained—C&W states that there are few signs of systemic imbalances that would threaten the onset of recession.

“Recent concern over tariffs contributed to increased public market volatility without having any identifiable negative impact on commercial real estate fundamentals, reinforcing commercial real estate as more attractive on a relative basis,” the report concludes.

Instant Insights /

Commercial RE Lending Remains 'Borrower Friendly' Despite Headwinds

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