Weitz Commercial - 150 Lake Street S; Ste 216 - Kirkland, WA - (206) 306-4034

Wednesday, January 2, 2019

Interest Rate hikes effects on Commercial Real Estate

Excerpts from a recent AP article and our comments surrounding it:

An important indicator in the U.S. commercial real-estate market is signaling that a decade long bull run is on shaky ground heading into the new year.

The gap between long-term borrowing rates and what some types of commercial properties on average yield is the narrowest it has been since 2008, according to data firm Trepp LLC.

In the past, this tightening spread has often presaged a drop in property prices, sometimes with dire results. “In 2007, looking back, that was a real red flag,” said David Steinbach, chief investment officer for Houston-based Hines.
Hines, one of the country’s biggest investors in office buildings, was a net-seller of that property type this year partly because it believes values are near their peaks, Mr. Steinbach said.
Too Close for ComfortThe gap between commercial property yieldand borrowing cost is narrowing.Source: Trepp LLC
%Average property yieldAverage lending rate2012’13’14’15’16’17’1845678
Other big investors and lenders are also reducing risk. Terra Capital Partners, a New York investment firm that specializes in commercial property debt, is offering fewer construction loans and making more first mortgages, which are safer.
Prudential Financial Inc. said it is cutting its exposure to property types that typically get hammered in a downturn—like office and fashion-oriented retail—and buying more recession-resistant property types, like housing that targets lower-income renters.
Commercial real-estate prices have increased steadily since 2009. In more recent years, as the economy has expanded, landlords also have enjoyed rising rents and falling vacancies.
But many are now thinking that prices have peaked. A Green Street Advisors value index of property owned by real-estate investment trusts increased only 2% in the 12 months ending Nov. 30, compared with the earlier years of the recovery which showed annual growth rates of as much as 20%.
At the end of the third quarter the average rate borrowers paid on loans packaged into commercial mortgage-backed securities was 5.03%.
One year earlier it was 4.52%, Trepp said. That increase “is a big deal on multimillion-dollar properties,” said Joe McBride, Trepp’s research director.
Rylee Park: As a general rule, a 1% increase in interest rates leads to a 10% decrease in purchasing power. Obviously this is a huge generalization as there are many cash purchasers, but the morale of the story is that the recent uptick in lending rates is a concern for short term asset appreciation. 
Not everyone thinks it is time to head for the exits. A still expanding U.S. economy and the amount of money sloshing around the market suggest the bull run can continue.
Investors purchased $152.7 billion of U.S. commercial property in the first three quarters {of 2018}, up 17% from the same period in 2017. 
Meanwhile, developers are building more, intensifying pressure on the supply side. JLL is projecting that this year more than 250 million square feet of industrial space will be delivered, compared with more 232.7 million in 2017.
Some major banks are also turning more bearish. Wells Fargo & Co., the country’s largest commercial property lender, has reduced its exposure to the sector to $110 billion this year, down over 5% in the past two years.
RPP: it is our contention that interest rate hikes will certainly play a role now and always in both the Real Estate and Equities markets. That said, the argument can be made that the Federal Reserve has been increasing rates recently simply as a measure to have 'bullets' in the recovery chest should the market slow down continue or increase. Given the amount of cash on the sidelines, commercial real estate and its creative 'triple net' structure will most certainly be a stable investment long term despite the short term hiccups it may encounter. This may not be true in the retail world as online stores continue to take market share, but will most certainly be the case in office/ industrial/ medical, etc on a market by market basis. 
For more information on Kirkland Commercial Real Estate, consider contacting us. You can reach me directly at Scott@ryleepark.com or via cell phone at 206.306.4034.
Scott Weitz - Designated Broker/ Attorney
Rylee Park Properties


  1. How can a company either improve performance or remain sustainable if customer is not at the center of all its actions & thinking. Buy a condo in Calgary

  2. Reliobrix Consulting is a main and conspicuous Property & Real Estate Consultancy in Delhi/NCR, established in 2013 and operating from Noida. Reliobrix Consultancy provides numerous ranges of consultancy services in real estate business, especially in housing & residential projects. Reliobrix is a highly reputed firm & with its well experienced professionals it understands the core need of its customers and gives suggestion as per the requirement and budget.


    Supertech Sports Village

    Supertech Eco Village-III

    Supertech Eco Village-II

    Supertech Eco Village-I

    Gaur City 14th Avenue

    JM Florence

    Amaatra Homes

  3. Business for sale houston by owner

    We have completed comprehensive training that prepares us for all facets of selling or valuing a business. We understand the utmost importance of confidentiality and live by the fact that confidentiality begins the moment that you contact us. We also understand the necessity of qualifying buyers and realize that a business will not sell to an “unqualified” buyer.

  4. launch price of 100 Twinkles per TEC. Since you can only buy them from those who participated in buying them during pre-launch at a rate of 100 Twinkles per TEC, no sane person would be ready to sale TEC below the price he/she bought it.Parc Clematis SingHaiYi

  5. Great post. To add to it Bulk SMS marketing could be of great help in promoting the Real estate business.

  6. #LuxuryRealEstateMarbella #LuxuryProperties #Investment #PropertySpecialist #Immobilienmakle #العقارات #недвижимость #Fastigheter #Mäklare #ForSaleMarbella @SpainForSale.Properties villa for sale la zagaleta 

  7. Trekking in Nepal is delighted to welcome you tiny but amazing country. Natures to renew one’s own self regard to relive of beauty realize of Nepal Tour to interact with its generous friendly peoples are highlights of Nepal Trekking and is one long term activity that draws repeat visitors with Treks Himalaya trekking company. Nepal is final purpose for trekking offers numerous options walking excursion to meet snowy peaks, their foot hills, valleys but however there is amazing for each who hope Trek in Nepal and mountain area. Typical trekking and Hiking in Nepal as unique combination of natural glory of Annapurna Trekking and spectacular view of Langtang Trekking is most rewarding way to skill Nepal natural spectacular view of Phaplu Everest Base Camp Trek and array is to walking, trekking, width and the height of country. Trekking is important of Nepal Himalayas on description Nepal Travel of large range of ecological features for Nepal Holiday. The country nurtures a variety of flora and scenery. Addition to natural atmosphere is rich Himalayan culture. Many of visitor trek to different part of Nepal every year to experience its rustic charm, nature and culture. Most treks through areas between 1000 to 5185m, though some popular parts reach over 5648 meters. Every travelers knows for trekking from all over the words an exciting experience in Nepal. #trekkinginnepal #nepaltrekking #trekinnepal #nepaltour #nepaltravel #Nepal #Trekking #Tour #Travel #tourinnepal #travelinnepal #hikinginnepal #Himalaya #TreksHimalaya #nepaltreks

  8. This comment has been removed by the author.

  9. Due to fluctuation in prices, real estate business is quite unstable. As such, there is a need to maintain continuous sales in this business. Since property sales can take quite a few days to complete, so it’s important to keep the customers updated with regular text messages. This can be done best with the help of heymarket real estate text marketing services.

  10. Very useful post. This is my first time i visit here. I found so many interesting stuff in your blog especially its discussion. Really its great article. Keep it up. Binary options recovery

  11. The Le_Meridian Funding Service went above and beyond their requirements to assist me with my loan which i used expand my pharmacy business,They were friendly, professional, and absolute gems to work with.I will recommend anyone looking for loan to contact. Email..lfdsloans@lemeridianfds.com Or lfdsloans@outlook.com.
    WhatsApp ... + 19893943740.


  12. Ingin deposit tapi rekening sedang bermasalah? Jangan khawatir..kami ada solusinya...
    Deposit via PULSA kini bisa anda nikmati..Proses cepat dan tidak ribet...

    Dapatkan Deposit dengan rate potongan terendah untuk Telkomsel, AXIS dan XL..




    Mudah bukan??? Tunggu apa lagi..Segera bergabung dengan kami sekarang juga..

    Daftar Poker Deposit PULSA ==>> Disini <<==

    Hubungi Kami Secepatnya Di :
    LINE : Donaco.poker
    WHATSAPP : +6281333555662

  13. Thanks for a very interesting blog. What else may I get that kind of info written in such a perfect approach? I’ve a undertaking that I am simply now operating on, and I have been at the look out for such info. Flat Fee MLS

  14. Very useful post. This is my first time i visit here. I found so many interesting stuff in your blog especially its discussion. Really its great article. Keep it up. Commercial Real Estate Financing Company

  15. Nice Blog, Bulk SMS Provider can help you increase your business.

  16. Are you looking for a business loan, personal loans, mortgage loans, car loans, student loans, unsecured loans for consolidation, project finance etc ... Or simply refuse loans from a bank or financial institution for one or more reasons? We are the right solutions for credit! We offer loans to companies and individuals with a low and affordable 2% interest rate. Therefore, if you are interested in an urgent and secured loan. For more information, please email us today: Via: Elegantloanfirm@hotmail.com.

  17. Love to read it,Waiting For More new Update and I Already Read your Recent Post its Great Thanks. Bellevue Property Management

  18. I was reading some of your content on this website and I conceive this internet site is really informative ! Keep on putting up. ki residence

  19. Positive site, where did u come up with the information on this posting? I'm pleased I discovered it though, ill be checking back soon to find out what additional posts you include. We Buy Houses Pittsburgh

  20. My name is Mrs Nadia Albert from Russia, And i am a happy woman today through the help of a Loan lender, Mr Russ Harry. I will refer any person that is looking for a loan to this Loan firm. He gave  happiness to me and my family, i was in need of a loan of $500,000.00 to start my life all over as i am a single mother. I met this honest and GOD fearing man loan lender that help me with a loan of $500,000.00 US Dollar, at a low Rate. He is a God fearing man, if you are in need of loan and you will pay back the loan please contact him Via E-mail-Elegantloanfirm@hotmail.com /Whatsapp number+393511617486