COVID brings uncertainty to commercial real estate’s office sector

<p><strong>In-depth report</strong></p> <p>The Ten-year rose 15 basis points last week, in a time when pricing pressure is driving yields up, and the world sees increases in oil prices and other products.</p> <p>“We’re probably pushing against a bit of resistance in yields on Treasuries,” explains Thirty Capital Analyst Jay Saunders, who added he’s still dovish on rates.</p> <p>The next rate increase is now expected in 2023, and Jay says rates aren’t likely to increase until employment numbers improve.</p> <h1>Inflation, jobs, impacting rates</h1> <p>“It’s really hard to get a grip on what’s going on with the job market,” says Jay. “The jobs market isn’t growing as quickly as people thought, and that’s going to keep the Fed sidelined for longer than people anticipated.”</p> <p>Thirty Capital CEO Rob Finlay says he thinks 1.60 could now be the floor and the rates band will likely be between 1.55 and 1.70.</p> <h1>For borrowers, the window is starting to close</h1> <p>Thirty Capital Analyst Jeff Lee notes that borrowers have only had a few weeks of higher rates, so it’s too early to note the impact.</p> <p>“But there is talk of maybe a little softening here from CMBS appetite. But they just released year-to-date numbers for all those securitization products and we're up 65% from last year, year-on-year,” he says.</p> <p>He estimates that borrowers have until sometime next year to optimize deals.</p> <p>However, Rob says that for borrowers, the window is starting to close. Rates are “in a band where they are going to stay.”</p> <h1>Market in transition phase</h1> <p>Analyst Jason Kelley notes that the Government's still fighting over the debt ceiling, which leaves a lot of uncertainty. He says the market's starting to transition from growth to value.</p> <p>The market is in a transition phase, which means it’s impossible to predict, and no one knows how long it will be, says Jason.</p> <h1>COVID brings uncertainty to commercial real estate’s office sector</h1> <p>The office sector is the one everyone is struggling w