Value, not Potential Interest Rate Increases, Driving CRE Retail Investment

Posted June 9, 2017

The Federal Reserve Board is indicating that it intends to increase interest rates twice more this year. But a new report from Real Capital Markets indicates that the expected rate hikes are not causing potential investors to move their purchases up.

“[I]n spite of rate increases dating back to last Fall and the prognosis for even further hikes, investors aren’t motivated to accelerate their acquisition plans in order to lock in rates at what continue to be extremely low rates. According to the survey, almost 63 percent of respondents said interest rate activities will not be the motivating factor,” the report states.

Instead, investors tell Real Capital Markets they are motivated by value.

“Someone investing in real estate should be focused on the underlying, unlevered issues such as performance, tenancy and competitive forces,” Brad Hutensky, CEO of Hutensky Capital Partners, says in the report. “Then they apply the leverage, after the decision to buy has been made.”

The report adds that, despite waves of store closings, buyers remain interested in retail sites. Some 41 percent say anchored shopping centers are the best investment opportunity, while 24 percent prefer strip centers.