Episode 307: Long-Term Interest Rates to Remain Very Favorable for Commercial Real Estate

Anticipated interest rate increases of about one and a half percentage points by year-end will still create a “very favorable” environment for commercial real estate, says Nareit Senior Economist Calvin Schnure.

Speaking on the Nareit REIT Report, Schnure noted that it is “appropriate” for the Federal Reserve to be raising interest rates at this point and removing the stimulus that was put in place early in the pandemic.

Schnure noted that goods inflation has been at about 12% over the past year, while service price inflation has slowed somewhat. “This suggests that we're not having a long- term problem from wage pressures with inflation. I do expect inflation to slow down, mostly in the second half of this year,” he said.

REITs, Schnure said, perform better than most other sectors during periods of moderate to high inflation because they represent a real asset that own properties whose values rise with prices and with leases that can respond to changing market conditions.