Marcus & Millichap

Special Report

10-Year Treasury Report

Special Research Report

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10-Year Treasury Breaks 3 Percent; Higher Rates a Positive Sign for Commercial Real Estate?

Rising interest rates spark fear from investors but reflect persistently strong economic growth that underpins commercial real estate performance. The 10-year Treasury rate inched past 3 percent for the first time since late 2013 following the “taper tantrum.” Though many investors fear the rising rates will erode their investment yields, they must consider the strength and durability of the current economic cycle and how it will continue to support commercial real estate performance. First-quarter job creation outpaced the growth rate of the past three years, while unemployment has been restrained to exceptionally low levels. Additionally, over 6 million jobs remain available, highlighting the tight labor market and the skills gap facing employers. Healthy economic momentum has driven both consumer and business confidence to extraordinarily high levels, with consumer optimism nearing an 18-year high in April. Rising confidence trends reinforce indications that consumption and business spending will rise this year, boding well for housing and all types of commercial real estate space.

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