Why Upcoming Fed Policy Changes Reinforce Positive CRE Outlook

Earlier this week, CNBC interviewed Marcus & Millichap’s President and CEO Hessam Nadji to discuss why upcoming Fed Policy changes and strong fundamentals reinforce a positive commercial real estate (CRE) outlook. Some major takeaways from the interview include:

  • Lower rates energize the market, Fed rates shifted from a headwind to tailwind.
    • Nadji explains how a Fed reversal turned what was considered a negative policy change at the end of last year into a positive one this year by stating, “The fed is now so accommodative in messaging that they’re going to be facilitating the life of this expansion, and not becoming a headwind to it. And of course, lower rates lubricate the market. “
  • Lack of overbuilding has resulted in a longer positive outlook for CRE.
    • Nadji attributes a lack of overbuilding in commercial real estate to the boom of E-commerce.

“Office space, for example, has been adding about 1/3 to 1/2 of new product compared to the prior peak of the cycle. Look at retail space in reaction to whats happened to E-commerce. The volume of any kind of retail being built is less than a 1/3 of what it was year-over-year prior to the last recession. That lack of overbuilding plus an economy that’s adding over 2 million jobs a year consistently in a low-interest-rate environment all spells a pretty good outlook for CRE.”

  • Tech expansion boosts demand for industrial real estates like warehouses, distribution centers, or storage facilities. E-commerce has been tough on traditional retail.
    • Tech-oriented metros experiencing increased rental demand for new hires.

Click here to watch the full four-minute CNBC interview with Marcus & Millichap’s President and CEO Hessam Nadji

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