Here's why the Fed cutting interest rates is a double-edged sword for commercial real estate
last month, and potential interest rate cuts from the Federal Reserve may not be enough to prevent that shoe from dropping.says that's because interest rate cuts from the Federal Reserve are a double-edged sword in that while lower interest rates will help companies service their debt, it won't do much good if the rate cuts are accompanied by an economic recession.ever since the COVID-19 pandemic started.
But could interest rate cuts from the Fed — which the market expects will happen in the second half of this year — help alleviate ongoing concerns in the commercial real estate market?"While lower interest rates would undoubtedly bring relief to CRE borrowers , the asset class is not immune to cyclical challenges, especially if the US economy experiences a hard landing," analyst Ebrahim Poonawala said in a Thursday note.
"The cost of lending charged is unlikely to decrease materially as credit concerns proliferate since lower interest rates would also likely suggest a weaker overall economy," Todd said.
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