Another insightful market perspective from John B. Levy & Company, Stuck in Second Gear, examines persistently elevated interest rates and their impact on commercial real estate financing, acquisition
- 5 hours ago
- 1 min read
STUCK IN SECOND GEAR: WHY CRE IS MOVING FORWARDBUT CAN'T REV ITS ENGINE
Big-picture summary
At the start of 2025, financial experts predicted interest rates would fall quickly toward 3.6%. Instead, long-term rates have remained around 4.5%. Commercial real estate is moving forward, but higher borrowing costs mean sponsors must adjust their capital plans to a higher-rate environment.
Wall Street expected rates to fall approximately 1%, but actual rates remained nearly 1% higher.
May 2025 marked a significant separation between actual yields and the original forward curve.
Federal Reserve cuts to short-term rates did not bring down the 10-year Treasury.
Sponsors should underwrite acquisitions and refinancings around a 4.25%–4.75% Treasury environment.
With borrowing costs likely to remain elevated, lender selection, loan structure and execution have become increasingly important. Contact John B. Levy & Company to discuss your financing needs.
John Levy (804) 500 9025 | jlevy@jblevyco.com
Sandler Passman (804) 500-9033 | spassman@jblevyco.com
Bram Levy (804) 500-9029 | blevy@jblevyco.com
Source: jblevyco.com