Even as the Federal Reserve made a long-awaited reduction in the effective federal funds rate, the near-term direction for yields on 10-year Treasuries is less certain, Marcus & Millichap said Monday. With the 10-year yield remaining range-bound at or near 4%, “investors have a window to lock in financing at comparatively low rates, although it is unclear how long that window will last,” the firm said in a Research Brief.
“The Fed cut rates for a reason, and that bears consideration,” according to the Research Brief. “A primary motivator to lower interest rates is the weakening labor market, which carries implications for commercial property owners.”
The cooling labor market has varying implications for commercial property sectors. For office, a hiring slowdown could motivate more occupiers to pursue return-to-workplace strategies, Marcus & Millichap said.
The firm described the outlook for apartments as “nuanced.” Although strong household balance sheets bode well for future consumer activity even amid a potential slowdown, “such a slowdown could temper some of the momentum in multifamily.”
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