Rate Cuts May Boost Confidence in CRE Market

Federal Reserve action to cut its discount and target federal funds rates 50 basis points may help restore confidence and liquidity in the commercial real estate market, according to Steve McCarthy, managing director at Buchanan Street Partners.At a commercial real estate investment and finance conference in New York sponsored by RealShare, he noted that the market is in a transitional period and said he expects commercial real estate capitalization rates to move up about 100 bps in the next year. Glenn Whitmore, senior managing director at Holliday Fenoglio Fowler, noted that a number of funds have hit their lending allocations for the year and said there will be a slowdown until people get a sense of where the market is going. Life companies and portfolio lenders remain very active, though, given that "when spreads are high on [commercial mortgage-backed securities], that's when you pounce," he said. Clifford Booth, president of Westmount Realty Capital, said he has seen a 5%-10% adjustment in pricing on average.