CRE | Weekly update (vol. 7)

Interest rates remain relatively stable as economy progresses.

While interest rates have moved up from recent lows, the ten year treasury sits near or below 3% and has appeared to stabilize after the initial moves in early 2018.

If this persists, it is great news for commercial real estate, as it means lower borrowing rates and less pressure on cap rates to rise.

Multifamily rents continue to grow in May, but at a slower annual rate.

The Yardi Matrix report showed national multifamily rents averaged a $4 increase in May to $1,381. This increase represents a 2.0% year over year rate of growth. This is down from 2.5% rate of growth last month.

The declining rate of rent growth is not surprising, given the level of new construction of luxury rentals. In fact, some markets should brace for rental rates declines. However, anything that caters to the "workforce" (i.e. below the medain income of the MSA) could see big increases if locl hiring is robust, as there is little new supply for this market segment.