Article written by Investor’s Business Daily – Thu, Jan 10, 2013 5:55 PM EST
What will rising interest rates do to commercial real estate values? I asked a similar question about home prices a few months back. Now with the run-up in interest rates on commercial mortgages, and my forecast that long-term interest rates will continue to rise, it’s time to wonder whether non-residential real estate will suffer from higher interest rates.
A drop in commercial property values is not baked in the cake if interest rates rise. In economic jargon, you must worry if you do partial equilibrium analysis; you worry less if you do general equilibrium analysis. The English translation: If I look at interest rates as magically set by a fairy living outside the economic system, then I worry. However, if I recognize that interest rates are part of the economic system, I am less worried.
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Jim Allen earned his bachelor’s degree from Baylor University in Waco, Texas and his masters from Louisiana State University. In addition to his multiple degrees he has taken numerous coursework in banking, marketing, accounting, and business law. As a complement to his sales experience, Jim also has 25 years experience in commercial real estate financing.
Saurage Rotenberg Commercial Real Estate is a member of the Baton Rouge Area Chamber of Commerce (BRAC); the West Baton Rouge Chamber of Commerce; the Baton Rouge Better Business Bureau; the Louisiana Commercial Data Base (LACDB); and the International Council of Shopping Centers (ICSC). Several agents, on an individual basis, are members of the Society of Industrial and Office Realtors® (SIOR), the Certified Commercial Investment Member Institute (CCIM); the National Association of REALTORS® (NAR); and the Greater Baton Rouge Association of REALTORS® Commercial Investment Division (CID).