What do you believe that the rest of 2014 has in store for Commercial Real Estate? 5 and the 10 year treasuries hit rock bottom in July of 2012 when the 5 year was approximately .55% and the 10 year hit 1.40%. Over the past year and a half though, the 5 year has risen 100 basis points and the 10 year is right behind as well increasing 140 basis points. As the federal reserve starts to taper the bonds they have been purchasing by approximately $5 billion, high rates look like they are coming full speed ahead.
Although this looks like a bad sign of things to come for the security rates, these current 5 and 10 year rates have not been this low since the mid 1950s. When looking at it in this perspective, commercial real estate for 2014 looks extremely positive and attractive to any and all investors. The predictions for 2014 are set as we will see interest rates staying at record lows, but will continue to increase based upon the tapering.
A sign of an increase is interest rates may be in part to the fact that commercial/ multifamily debt stayed still at $2.47 trillion, whereas the multifamily mortgage rose up to $887 billion, an increase of 1.2 percent. This year will also see refinancing staying campped at 75% (80% for multifamily). Fannie Mae and Freddie Mac will continue to be a crucial part to the multifamily real estate lenders for the entire year of 2014, as in 2013 we saw a closed value of just over $75 billion. Look for a potential small decrease of 10% or $5 billion from these market giants in 2014 though as it may be mandated that their volume is reduced.
Overall, all signs point towards a buy market. The interest rates have never been this low for over 60 plus years and the economy, construction and spending is all set to rise even further in 2014. What will be interesting is how all of 2013 and 2014 will play out in 2015. The current contracts being written for lending may mature differently in the near future as the conditions are much more loose currently than they will be later on down the road. For 2014 though, look for another substantial increase as the commercial real estate market stabilizes and grows stronger.