Interest Rate Outlook

What Stabilizing Interest Rates Mean for Commercial Real Estate

• Kevin Warsh, President Trump's nominee to succeed Fed Chair Jerome Powell, testified before the Senate Banking Committee, bringing renewed focus on the direction of monetary policy.
• The Fed remains bound by its dual mandate to balance maximum employment with price stability.
• Labor conditions have softened but remain stable, with job growth averaging roughly 22,000 per month over the past year and unemployment in the low- to mid-4 percent band
• An unemployment rate in this range is historically consistent with full employment, limiting the urgency for policy easing.
•  Inflation risks have grown, driven largely by rising energy costs, pushing the CPI up 85 basis points last month to 3.3 percent.
• With headline PCE expected to rise toward 3.4 percent, well above the 2 percent target rate, market expectations for near-term rate cuts have diminished sharply

Borrowing costs appear stable. After a brief period of volatility surrounding the Middle East conflict, long-term interest rates have settled for now. 

• At the onset of the Iran conflict, the 10-year and 5-year Treasury yields rose roughly 50 basis points, reflecting heightened geopolitical and inflation risk.
• In response to interest rate volatility, CRE lenders widened spreads, temporarily raising the cost of debt capital. 
• Treasury yields peaked in late March and have since retreated, with recent movements suggesting rates are stabilizing rather than continuing to trend higher.
• The Blue Chip consensus forecast places the 10-year Treasury near 4.2 percent at year-end, implying a relatively rangebound interest rate environment, barring further shocks.
• Greater stability may support lender confidence, potentially leading to narrower spreads and a lower cost of debt capital.

Financing conditions recalibrate. Commercial real estate borrowing costs have returned to a more consistent range across capital sources following early-year disruptions.

• Bank lending for commercial properties is currently consistent with the last quarter of 2025: the low- to mid-6 percent band.
• CMBS borrowing costs remain higher relative to banks, with rates in the 7 percent range.
• Multifamily financing remains comparatively attractive, with agency debt in the low- to mid-5 percent range and bank lending in the low-6 percent range.
• With benchmark rates stabilizing, financing costs appear to have normalized following the early-year disruption.
• Competitive yields, durable cash flows, and inflation-hedging characteristics are increasing CRE's appeal, further reinforced by financial market volatility and rising inflation.
• In a high-inflationary environment, CRE benefits from its role as a hard asset with durable long-term value retention. 

* As of April 13, 2026
Sources: Marcus & Millichap Research Services; Blue Chip Economic Indicators; Board of Governors
of the Federal Reserve; Bureau of Economic Analysis; Bureau of Labor Statistics; CME Group;
Federal Reserve; MMCC