The Best Ever CRE Show JF 4028: Cap Rates Elevated, Construction Pullback and Positive Leverage Returns with John Chang
Sep 14, 2025
John Chang, head of research at Marcus and Millichap, dives into the current economic landscape, highlighting a slow rise in inflation and its implications for Fed rate cuts. He discusses the rare positive leverage available for multifamily financing and the ongoing decline in construction starts. Chang notes the challenges posed by high labor and material costs, while also uncovering favorable long-term trends in certain asset classes like Class A/B multifamily and medical offices, rife with opportunities as conditions evolve.
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Inflation Is A Slow Trickle
- Inflation is rising slowly and unevenly, with food leading the gains.
- Core CPI remains stable month-to-month, suggesting a creeping rather than explosive inflation trend.
Bond Market Is Driving CRE Rates
- Weakening employment and slow inflation raise the probability of Fed rate cuts.
- The 10-year Treasury is near 4%, which matters more for CRE lending than the overnight Fed rate.
Buy When Agency Multifamily Rates Hit ~5%
- If you can access ~5% agency multifamily financing, you can achieve positive leverage versus current cap rates.
- Prioritize strong assets and buyers because financing terms depend on down payment and DSCRs.