Wednesday, July 31st, 2019 July31st2019

Sell for More News: What the .25% interest rate cut means for commercial real estate sellers

Published on July 31st, 2019

Sell for More News is a weekly blog series with interesting information from the world of commercial real estate.

 

The Federal Reserve recently cut its key interest rate by a 1/4 percentage point to insure the U.S. economy against downside risks from weak global growth and trade policy uncertainty. This is the first rate cut of Fed chairman Jerome Powell’s tenure, and the first easing since the end of 2008, when central bankers lowered rates to near zero levels.

I don’t expect the interest rate cut to have a significant impact on the commercial real estate industry or the prices sellers can expect to receive for their properties.

Let’s remember that the U.S. economy remains healthy as indicated by low unemployment, wage gains, consumer sentiment and recent GDP growth. But trade uncertainty, corporate earnings, a manufacturing slowdown and issues with Brexit and Europe prompted the Federal Reserve to act now to sustain economic expansion.

In my view, the move to cushion the economy will likely have a negligible effect on the commercial real estate industry because we’ve already had a fairly dramatic decline in financing rates and we haven’t seen much of a reaction.

This interest rate cut can be viewed as more of a signal to the market than anything else.  Which is a positive thing that should be applauded but it won’t, by itself, increase transaction activity.

With regards to the future, the Fed seemed to step back from signaling potential further rate cuts in September which the markets viewed as confusing.  Prior to the confusion, the feeling was that there would be at least one more rate cut this year.

 


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About Beau Beach, CCIM

Beau is a tenacious Commercial Real Estate Broker, author and adoring father of four. His clients appreciate his no-nonsense demeanor and his legendary work ethic.

Beau leads Beachwood which is a commercial real estate broker for sellers in the Nashville, Milwaukee, South Florida and Chicago markets.

He’s the author of the books The 3 Reasons: Why Most Commercial Properties Don’t Sell and True Wealth: What Every Seller Should Know About 1031 Exchanges.

Beau can be reached at 800-721-3287, click to schedule a call or Beau@ProwessIRES.com