"FED Chair Jerome Powell surprised Wall Street with a half-point interest rate cut Wednesday, September 18th to 5%, the first cut of its kind in over a year." This was many articles this month, just look at CNBC Business, WSJ, Fox Business, Reuter, or AP. But Ryan, what does it all mean?
What does it mean for the commercial real estate market?
Can we expect a flurry of activity off the back of this announcement? Why hasn't my building sold?
These are some of the many common questions we've received or asked ourselves recently.
For most of 2024, we have seen a healthy demand, particularly in the industrial/warehouse asset class. However, in our brokerage and at a glance of the market, this wasn't translating to properties under contract or deals closed. As a result, our working hypothesis has been that folks expected a rate cut to come in 2024, but many did not expect it to take nine months. The cost of financing has been expensive, easily twice as expensive as in years past. Deals that penciled back then no longer make sense. Add in an increase in building materials costs and redevelopment costs, and it's no surprise that many buyers have been waiting/watching on the sidelines.
So Saint J Powell has blessed us with a reprieve, and the floodgates are open, right? Not so fast. Things take time in commercial real estate. As we cruise through fall into winter, I would caution any seller that it will take months to see how the market will react to this change in monetary policy. So the common advice we give of "be ready to meet the market, where the market is, when the market is ready" rings true. Start having conversations now, especially if you're currently selling your property or considering listing it. While I can't guarantee it, I'm preparing for an active spring 25' to serve my clients best and even make a few real estate moves myself.
I'm reminded of two phrases from my time at Shattuck St. Mary's High School: "Success is where preparation meets opportunity" & "Success is achieved by those who try."
Here's to preparing and trying!
-Ryan
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