Lenders are slowly starting to enter the market again, and so are investors. Since more lenders have entered the market the spreads have come down, but the 5 and 10 year T-bill rates have also been rising. Long term interest rates will continue to rise so long as the US government continues to pile on more debt and must continue to sell this debt to investors. As investors continue to become more and more concerned with the US debt levels they will continue to diversify their currency holdings away from the US dollar. The US will have to raise the interest rates that they pay to attract investors to the US dollar which will increase long term interest rates. Since the value of commercial real estate is now based more on cash flow than speculation, higher interest rates will reduce values. If you are considering selling in the next few years, you may want to sell now before interest rates increase. If you are considering buying, buy now before interest rates increase.
Alterra Real Estate Advisors
Apr 27, 2010