Both Interest rates and inflation can be expected to have an effect on commercial real estate investing for months and possibly years to come. With positive economic data spanning most of the country, the Federal Reserve announced back in December that it would back off from its bond-buying program. Ever since then, interest rates have slowly been climbing upward. Long term interest rates have risen from about 1% to about 3%. Average mortgage interest rates are now hovering in the mid 4% range.
Economic growth is forecast to be between 2.4% and 3.2 % for 2014. Economic growth is good for commercial real estate investors. Economic growth creates demand for commercial real estate. It increases occupancy rates and it leads to higher rents. Most of this will occur early in the cycle because new construction can take a year or more to catch up with demand. However, new construction will eventually fill the void that is about to occur.
© Andy Dean – Fotolia.com
The Impact of Rising Interest Rates on Commercial Investing
Rising interest rates by themselves don’t necessarily have a negative impact on all commercial real estate investing. However, it should impact the commercial sectors that you choose to invest in. …read more