In mid-December, the Federal Reserve Bank announced it is prepared to begin raising interest rates earlier than previously announced due to the potential threat of broader and longer-term inflationary pressure. In November, the annual rate of inflation exceeded expectations, reaching 6.8 percent, the largest 12-month increase since June 1982.
From a historical perspective, stocks have not fared well during periods of rising interest rates, when operating expenses and the costs of borrowing money increase, negatively impacting future profitability and stock price. For commercial real estate investors, there is a fear that rising interest rates will cause capitalization rates to also rise, triggering a potential decline in property value and weaker returns. However, investors also must consider that rising rates signal an improving economy that can commanded high rents and help to buoy commercial property values and investor returns over the long term. The key to navigating these potentially challenging times is to work with experienced commercial real estate advisors with a proven record of performance.
With offices in Miami, Orlando, New York City and Geneva, the team at Orion works with investors, developers, property owners and brokers through all phases of real estate transactions, from strategic planning and analysis to financing, negotiation, property management and disposition. For more information, call (305) 278-8400 or email firstname.lastname@example.org.