What does the Fed's increasing interest rates mean for commercial property mortage rates going forward?
Is this already priced-in to current mortgage rates, or can we expect to see increases going forward?
Not priced in yet. On longer term debt (5+ years), the 10 year could get up to 3% very easily by the end of the year. Depending on the spread to corporate bond yields, we could see all in rates at 4-5%. Floating rate money could see SOFR to 2% by year end. I predict upward movement in Multifamily and Industrial cap rates, slowly, once these hurdles I mentioned above are hit.
We’re already pretty much in the 4s on both fixed & floating products for full leverage. Debt fund spreads have widened out 30-40 bps on vol & CRE-CLO issuance, and, as you mentioned, SOFR is going to move in lockstep with fed funds. Cap rates have to go up….
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