November 2024 Newsletter

Lower Interest Rates: Good for Landlords & Tenants Alike | 

The real estate market is buzzing with speculation that interest rates could soon drop, especially if Trump gains influence over economic policy. Recent market movements, like a rise in CRE Brokerage and Real Estate Investment Trust stock prices, show that equity investors are hopeful about rate cuts in the near term.

Lower interest rates could provide multiple benefits for real estate. First, cheaper debt reduces the financial burden on property owners, making it easier to hold onto assets and stabilizing property values. Lower financing costs also encourage new projects, which can add value across the sector.

However, the positive effects go well beyond the supply side of the CRE market. Lower interest rates increase liquidity in the market and means more money swashing around to boost hiring and job growth as companies, young and old alike, find it easier to borrow and expand. This growth in hiring also impacts office space demand, as more companies seek places to set up or expand their operations.

Increased tenant demand helps alleviate the principal challenge of high vacancy in some office submarkets and especially with those office buildings that have struggled. Lower interest rates could also encourage tenants to sign longer leases, which would stabilize income for property owners and make assets more attractive to investors.

In short, if interest rates go down, real estate could see rising property values, more leasing activity, and a return to growth. For landlords and investors, this could mean a much-needed turnaround for the sector with tenants who are bullish and optimistic about the future.

Until next month,
Ben

Ben Blumenthal
Principal Broker | Noah & Co.

For the rest of our November 2024 Newsletter, click here.