Article submitted by Matthew Shirley, CCIM, International Trade and Finance LSU
The FED’s July Beige Book Summary reported annualized GDP growth at 4.1% (strongest in 4 years) and mentioned “inflation pressures are building”. With the next FED meeting scheduled for September 25-26th, experts are split on whether the FED will increase its target rate another 25 basis points. As a note, the current Fed Funds Rate sits at 2.00% and the Wall Street Journal Prime Rate, on which most banks peg their real estate credit lines, is at 5.00%.
As rates continue to creep north, real estate investors should expect Cap Rates to slowly rise to account for increased debt service expenses. That said, potential Sellers may consider actively marketing investment properties to capture current Cap Rate sales that will deliver highest possible sales prices. Conversely, Buyers will increasingly demand lower sales prices as their bottom line diminishes due to increased bank costs.
Matthew Shirley joined Saurage Rotenberg Commercial Real Estate in January 2011. Matthew is a graduate of Louisiana State University with a degree in International Trade and Finance. While at LSU, Matthew was a member of Omicron Delta Epsilon – The International Honor Society for Economics. Matthew’s professional memberships include the Greater Baton Rouge Association of REALTORS® Commercial Investment Division and the Louisiana Commercial Data Base (LACDB).
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).