Question 2

Life Sciences, Industrial, Multifamily | Boston | Male | 20 Years in CRE

I think the first drop will be a catalyst for a sharp increase in transaction activity, specifically with assets that have longer duration lease terms without a near-term mark-to-market opportunity transaction. These assets have seen the widest bid-ask spread between buyers and sellers over the past 24 months given they are highly interest-rate-sensitive. Our focus would be to look at that event as an opportunity to improve our debt terms across our portfolio. 

Retail | Houston | Male

We will instantly evaluate the reversion strategies for clients who own CRE and gauge current and prospective clients’ interest in acquiring sites for development.

Condo and Multifamily | South Florida | Male | 20 Years in CRE

Regardless of its actual substantive effect, the first drop in interest rates will have a massive impact on market perception. It will send the signal that things are moving in the right direction and that the capital markets are ready to open up again. I believe the capital floodgates will open back up and transaction volume will increase substantially across the board. 

Residential Brokerage | New York | Female | 35 Years in CRE

The first interest rate drop is expected and thus may not have an immediate impact unless it is followed by a series of cuts. What we ultimately need is a reversal of the anti-landlord legislation introduced by the progressive caucus, whose agenda seems to be aimed at devaluing real estate for redistribution purposes. Currently, we are witnessing what can be termed the “Big City Short.” Real estate owners in major cities are experiencing significant losses in property values due to the unprecedented and intentional spike in interest rates coupled with anti-landlord sentiment.

Office, Industrial, Land | San Antonio | Male | 44 Years in CRE

A gift, as I do not expect it. If it happens, we will try to place or refi with fixed-rate, long-term debt on our projects and hold.

Development | Washington, D.C. | Male | 23 Years in CRE

The first interest rate drop will send a positive signal to the market, demonstrating more of a positive trend that we hope will cause the credit markets to start softening their approach to lending by providing more favorable terms to borrowers. Positive economic trends demonstrate more confidence in the market, which will lead to more transactions. 

Lending, Debt Management, Origination | San Francisco | Male | 20 Years in CRE

The actual reduction in rates should result in borrowers considering floating-rate debt on more light value-add and value-add deals vs. five-year fixed-rate financing. The reduction in interest rates should also lead to more transactions and more conviction about market cap rates.

Multifamily, Industrial, Self-Storage, Manufactured Housing | Dallas | Male | 30 Years in CRE

It may begin to further enhance liquidity in the overall market, which would increase volume of new investment and disposition activity.

Mixed-Income Housing | Boston | Male | 15 Years in CRE

It's possible that the developments we start today will work better if interest rates drop in the future, but we will see. Unfortunately, my interest rate crystal ball broke awhile ago, so I try not to count on these types of things.

Brokerage | Los Angeles | Male | 20 Years in CRE

We think it will be a bit more challenging for sellers. We call this the Taj Mahal effect, meaning our value was Y in 2022 and currently it is X, and now that rates drop I should be able to go back to my Y peak pricing. Giving the illusion that values will go back to peak when, in retrospect, they should be giving an entirely new value that actually coincides with current actual trends and transactions. From a buyer perspective, it will make deals doable, which brings a lot of the dry powder that has been sitting on the sidelines out to the playing field.

Office | Washington, D.C. | Female | 25 Years in CRE

The interest rate drop would need to be significant enough to help restore value in these properties, which in turn may encourage investors to shift their focus back on unlocking value in their assets and hopefully lead to an increase in development activity. There is clearly tenant demand for new development, and we believe the first movers on new development will be rewarded.  

Office | Houston | Male | 42 Years in CRE

The interest rate is a nonissue. The issues for office buildings are long-term and secular and not cyclical. The solution is no new supply and decrease (tear down and convert to residential) the supply that we have.

Capital Markets | National | Female | 30 Years in CRE

Clearly, a rate cut will prove helpful. Full stop. However, given today’s sharply higher rates — in both mortgages and capitalization rates — the Fed would need to cut rates more sharply than the 25-50 basis point move that some are anticipating for 2024. Anticipation was high at the outset of the year that some six rate cuts were in the offing. Now, we’re focused on one rate cut in 2024. It’s a start but falls far short of what’s needed to rightsize today’s challenges not only in the commercial real estate space but also in single-family residential markets. Both sectors are key drivers of the U.S. economy and have the potential to weaken the U.S. economy.

Self-Storage Investor | Albuquerque | Male | 20 Years in CRE

The first rate drop will begin to defrost the frozen equity markets. It might not have a dramatic effect initially, but it's the beginning.

Office, Multifamily, Hotel Investment, Development | Denver | Male | 24 Years in CRE

It won’t. We have a strategy. We have a mandate through our fund to invest in multifamily, and we will maintain our discipline, focus on risk management, and try to find deals with asymmetrical upside. We don’t typically allow external factors, especially ones we don’t control, to inform our strategy. We are long-term investors and understand that the market will constantly fluctuate, but we can’t allow things like a quarter-point drop in interest rates to dictate our behavior.

Retail Investment, Leasing | Atlanta | Male | 18 Years in CRE

No impact on our business other than using it as a marketing tactic to get buyers interested and sellers to sell. 

Legal | New York | Male | 30 Years in CRE

Given the market’s general consensus of when (and how much) the rate cuts are expected to be cut by the Fed, I don’t expect there to be any significant shift in market activity or expectations. The real shock would come if macroeconomic data support something unsuspected such as a rate increase. That will be a shock to the CRE sector and may have broader impacts on the regional banks with large CRE exposure.

Development, Investment | Chicago | Male | 16 Years in CRE

I think a big question after the first rate decrease will be if there will be more that follow, and if so, when? The impact would lower borrowing costs and likely create more liquidity to finance new industrial, data center, student housing and multifamily developments. As interest rates decrease, we anticipate property valuations to rise, making it an opportune time to evaluate dispositions. The rate drop will likely stimulate buyer and tenant demand.

Industrial | New York | Male | 15 Years in CRE

I view interest rate activity as inconsequential to our deal flow. Regardless of interest rates, we are touring properties, submitting LOIs and establishing the framework to close deals. Hopefully, as interest rates drop, our buyers can underwrite deals to higher values, which might present more compelling sales opportunities for property owners.

Investment | National | Male | 25 Years in CRE

The market and capital are already anticipating a drop in interest rates. The issue with the market now is that there is a dearth of debt capital for office assets. While the cost of capital is very important, the only deals that are getting done are most often the result of the seller providing financing. Few new office sales are happening with bank, debt fund or life co-lenders. 

Multifamily | Brooklyn | Male | 21 Years in CRE

We expect the bid-ask spread between buyers and sellers to shrink, and this should induce more transaction volume.

Affordable Housing | New York | Male | 23 Years in CRE

The hopeful first interest rate drop will be a harbinger for being able to leverage more debt to make deals pencil out better. Interest rates will drop well before costs do, so anything that makes plugging gaps easier is welcome. If rates start to drop, it will ultimately yield the most benefits to borrowers who had to move forward on floating-rate debt details for whatever reason.

Industrial | Southern California | Male | 21 Years in CRE

The market has become more accustomed to the current interest rate environment, but there is definitely more pent-up demand waiting on the sidelines for interest rates to drop. New development starts have been only a trickle of what they were in previous years, as financing does not pencil out like it did when there were significantly lower interest rates and seemingly endless demand for industrial absorption. We are not an organization that has a large capital markets division, so we are perhaps more insular to this than our peers in this regard, but the interest rate environment is still challenging for our clients that are looking for financing for the growth of their operations or perhaps wanting to pursue a build-to-suit project.

Development, Investment | Washington, D.C. | Female | 15 Years in CRE

We have several projects on hold waiting for viable construction financing. We are in a holding pattern until debt pricing becomes more attractive. We are open to new deals, but really not seeking new opportunities until we clear the existing project decks. 

Multifamily | Washington, D.C. | Male | 20 Years in CRE

The key factor will be the narrative and reasoning provided by the Federal Reserve regarding future expectations, rather than just the initial interest rate cut. We view this point in the cycle as an attractive entry point.

Retail | Chicago | Female | 26 Years in CRE

It will go from a “when” to a “how far, how fast?” It will really depend on what the triggers are for the first rate cut. Softening inflation and growth equals slower and small cuts. A black swan market shock could equal faster and further cuts. 

Finance | New Jersey | Male | 26 Years in CRE

A rate drop, whenever it occurs, will significantly impact our business strategy and decision-making. Over the past few years, we've thrived amid rising rates, meeting increased demand from those excluded by traditional banking. A rate decrease will enable us to offer more competitive rates again, stimulating loan volume and supporting our community-focused initiatives. This adjustment is crucial for us to navigate the broader market rate shifts effectively while sustaining our mission-driven lending practices.

Multifamily | Atlanta | Male | 40 Years in CRE

The first interest rate drop will minimally affect us. We have adjusted our business plan to adapt to this “higher for longer” interest rate environment, and the first cut will not materially impact our business. Further sustained rate cuts will have a very positive effect on our business and will accelerate our growth. 

Office Tenant Representation | Denver | Male | 18 Years in CRE

Inflation needs to get under control for my segment of the business to benefit. Rate cuts would lead to better corporate borrowing rates, but if that leads to increased inflation, it could mitigate any benefit to employment. Additionally, the continued inflation in construction has made projects very difficult to pencil. 

Development | Washington, D.C. | Female | 30 Years in CRE

An interest rate drop will help homeownership sales and resales in the market, and may allow larger multifamily to proceed. Loans on completed projects will become easier. They may move some projects from the sidelines.

Brokerage | Washington, D.C. | Female | 36 Years in CRE

It should provide an opportunity for many building owners to secure access to much-needed capital and lock in new loans. Quite a few owners, many who one wouldn’t historically see struggling, are showing a “pencil down” mentality and forgoing doing deals as their loan maturation dates are coming up.  This will broaden the range of options for our clients.

Development | London | Male | 35 Years in CRE

While lower rates will improve total borrowing costs, we’ve already seen lending costs decline thanks to narrowing margins in part due to all the institutional capital shifting to debt strategies and to a positive view that we’re at or near the bottom. We still need to take a forward view on interest rates, but through the life of a business plan of say, three to five years, which really shouldn’t reflect short-term changes. The yield curve (rarely accurate, but a worthwhile indicator) suggests the risk-free rate will come down, but I’m not banking on it happening quickly.

Of course, lower interest rates are great for our assets under management and will improve valuations. But in terms of decision-making on new investments, I would argue that the focus shouldn’t be on short-term changes to the risk-free rate, but rather on mispriced risk and/or illiquidity premiums. 

Office Redevelopment | Dallas, Denver | Male | 31 Years in CRE

It is clearly difficult to make anything underwrite under the current rate. If you can buy on a 9.5% cap rate and make something make sense, you will definitely reap the rewards once interest rates start to taper.

Development | Washington, D.C. | Male | 25 Years in CRE

The first interest rate drop will be a breath of relief. But it is likely to be more of a signal to the debt and equity markets, and then we expect to see a prolonged period of gradually decreasing rates. 

Retail | Pan-European | Male | 35 Years in CRE

It will help a little, but five-year rates are still high and not moving much — even sometimes moving in the other direction.

Office | San Francisco | Male | 15 Years in CRE

I don’t think it changes much for us. We are more focused on when debt becomes more available for office buildings, as currently it is very limited. 

Multifamily | Philadelphia | Male | 26 Years in CRE

Interest rate drops will provide a “fresh look” for tenants at previously ignored properties due to potential debt service coverage relief.    

Finance, Venture Capital | Atlanta | Male | 20 Years in CRE

I don't necessarily think that we honestly have any reason why we would have an interest rate drop. Interest rates drop to stimulate the economy. The economy doesn't need to be stimulated. It makes no sense for there to be interest rate drops…if there are interest rate drops, there are probably more transactions, and a lot of our borrowers use our money for down payments to buy new properties, so we will probably see a pickup in that activity. 

Private Equity Investment | London | Male | 20 Years in CRE

It will lower borrowing costs across existing assets, which, while welcomed, will probably not change our strategy meaningfully.

Brokerage | Chicago | Female | 16 Years in CRE

When interest rates finally drop, it will be a game-changer for my business and decision-making for landlords. Lower borrowing costs will open up new investment opportunities, making it easier for clients to acquire and develop properties, ultimately causing a boost in business. Tenants will likely feel more confident, leading to more long-term lease commitments and greater occupancy stability. Overall, this shift will enhance the competitive edge, allowing more landlords to seize market opportunities more effectively and thrive in a more favorable financial environment.   

Corporate Real Estate | Houston | Male | 43 Years in CRE

Unless interest rates change dramatically (up or down) over the next 24 months, which I don’t think will happen, the impact on my clients and my business will be minimal. 

National Business Development | Houston | Male | 30 Years in CRE

Anything that creates more certainty in the market makes our businesses more buoyant. Any interest rate cut helps the cause. 

Investment Sales | Houston | Male | 11 Years in CRE

More than anything, the first interest rate drop will provide a signal to the market and a morale boost for our agents and the commercial real estate industry. While signs suggest the worst is behind us, a rate drop will likely not impact our aggressive, proactive strategy. Everyone has heard the Fed’s conservative messaging loud and clear, and we’re in the business of looking forward and applying the most likely assumptions tailored to each client’s individual circumstance. 

Affordable Housing | Atlanta | Female

I expect 0.25% — it won’t affect our business or decision-making.

Financing | Los Angeles | Male | 12 Years in CRE

We don’t expect this anytime soon. We believe there is an observer effect on economy, which results in rates remaining higher for longer. Essentially, the perception of rates being cut changes the actual outcome. The moment the Fed forecasts a rate cut, people start to get bullish and stocks/economy start to heat up. Imagine a balloon that is losing helium, but the moment the balloon starts to fall, the excitement sends an upwind causing the balloon to rise again. Imagine this happening over and over again until the balloon loses enough helium to really stay low even with an upwind.  

Retail | New York City | Male | 17 Years in CRE

I think it has to do more with values, underwriting values in real estate, people who acquire and assist buyers in their acquisition.

Proptech | Los Angeles | Male | 18 Years in CRE

While a rate cut will likely decrease capital costs — which would improve property prices and narrow the bid-ask gap, leading to increased market activity — some of the rate drop reactions may already be baked into market pricing, so we’re careful not to celebrate too early. A rate drop would likely signal the start of a new cycle and the beginning of a new bull market. In some ways, we are operating as if the cut may never come while staying mindful of the opportunities that will emerge if and when it does. It’s about balance and evaluating strategic decisions on a case-by-case basis.

Multifamily Development, Investment | Washington, D.C. | Male | 15 Years in CRE

We are currently taking advantage of market dislocations in submarkets and asset classes such as student housing and multifamily, buying at 9%-10% cap rates. If interest rates drop, we will refinance these assets at lower rates, significantly increasing our cash-on-cash returns. However, we anticipate that these 9%-10% cap rates will dry up quickly, so we are not overly concerned if interest rates remain high until we exhaust our available capital.

Hotels | Atlanta | Male | 21 Years in CRE

The first rate drop will be negligible to the U.S. economy and my business with likely only a 25-basis-point reduction. Monetary policy lags and takes at least nine months to work its way through the U.S. economy. The effects to my business decision-making is none given the WSJ Prime interest rate is at 8.50%.

Brokerage | Denver | Male | 45 Years in CRE

The first drop will allow people to feel more positive about the future of the economy overall.

Office and Industrial Tenant Representation | Houston | Male | 15 Years in CRE

While our primary focus is on tenant representation for office and industrial users, which insulates us somewhat from interest rate fluctuations, a rate drop would positively impact our clients needing to buy or sell their buildings. It will likely ease the burden of construction costs for build-outs, facilitating smoother deal closures and benefiting both our operations and our client’s financial positioning.

Multifamily Investment | Chicago | Female | 20 Years in CRE

Interest rate drops will positively help our business because in real estate, when the rates drop, consumers feel more encouraged to buy. We will be more encouraged to invest in the multifamily asset class in the broader Chicago market.

Office | Philadelphia | Male | 20 Years in CRE

Capital sources are eager to put money to work and get back in the game. A rate drop will open the floodgates and give investors confidence that better days are ahead.

Adaptive Reuse, Urban Mixed-Use | Atlanta | Male | 25 Years in CRE

While a drop in rates is helpful (and already being built in to some models), it will not be enough to overcome the loss of value in some sectors. With no institutional equity playing in office, lower rates cannot overcome what will be very soft demand.