Short-Term Wins vs. Long-Term Challenges: Inflation, Rates & CRE Impact

Winning the battle but losing the war?

The battle:
-- Claudia Sahm vs. Larry Summers
-- Transitory inflation
-- Rate hikes
-- "When will it end?"

The war:
-- Borrower vs. lender
-- Quantitative Tightening
-- No more ZIRP
-- Slower growth
-- 150 bps increase in long-term rates across all scenarios

Today's realities:

Short-term rates may be 50 bps lower next week vs. last week...

...but that floating-rate apartment loan with a 5% debt yield (compared to 5.5% cap rates) is still due next year.

...office buildings are still 20%+ vacancy with very few buyers.

...and there's still only a 50-75 bps spread between development yields and exit cap rates.