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Commercial Real Estate Recovery Kicks Into High Gear

Consumers are resuming pre-pandemic activities, such as working at the office, dining out, and attending sports events, which is boosting all commercial sectors.

Despite the financial pressures of rising interest rates and high inflation, consumers are returning to their pre-pandemic lifestyles, providing a boost to commercial real estate across all sectors, experts said Wednesday at the National Association of REALTORS®’ quarterly Real Estate Forecast Summit.

Mortgage rates for commercial loans have already risen 150 basis points so far this year, but further increases in 2022 are likely to be less sharp, said NAR Chief Economist Lawrence Yun. A slowdown in rate hikes could provide stability as the commercial market continues to recover from taking a deep hit during the pandemic. Yun pointed to the difference between the federal funds rate, which the Federal Reserve raised to 0.5% earlier this month, and the average interest rate on commercial mortgages, which is around 5%. “The market is anticipating multiple rounds of increases,” he said. “Any further rises in the federal rate are already factored in.”

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