Rising Treasury Yields Rattle CRE

Good morning,

Rising Treasury yields rattle commercial real estate, the Fed’s hawkish hold raises further concerns; and office woes plague ATL despite outsized growth. Let’s delve into today’s topics.

📈 Market Update

📈 Rising Treasury Yields Rattle CRE

Surging Treasury yields continue to send shockwaves through CRE, with the 10-year Treasury yield hitting 16-year highs above 4.5% in recent weeks. The Fed's latest projections signal higher rates for longer, weighing on stocks and hurting rate-sensitive sectors like tech and housing. Though some expect yields may peak soon, ongoing supply/demand dynamics and marginal buyers could keep yields elevated.

Fed's Hawkish Hold Raises Further Concerns:
Last week's FOMC meeting held rates steady but projected higher rates for longer, worrying investors and sending stocks down. Housing data showed ongoing low transaction volume but sticky prices. Labor unrest expanded with more strikes. CMBS trading was light and spreads widened across the capital stack. Overall, the Fed's hawkish signals added to mounting concerns in commercial real estate markets.

🏢 Office Woes Plague ATL Despite Outsized Growth

Despite strong population and job growth, Atlanta's office market is suffering from soaring vacancies, falling rents, stalled projects, and mounting defaults. Weak return-to-office, ample new supply, and reduced business travel are disconnecting office demand from the city's economic success. The turmoil shows even hot Sunbelt markets aren't immune to the nationwide office decline.

✍️ Further Reading

• Kayne Anderson Acquires $1.3 Billion Office Loan Portfolio From Synovus Bank (CS)

• As Pre-Pandemic Leases Expire, Vacancy Could Rise in SF Office Market (RD)

• Pimco Targets Returns Matching Private Equity With Bespoke Deals (BBG)

• US Risks Its Top Credit Rating With Shutdown, Moody's Warns (BBG)

• US Manufacturing Rebound Faces Real Estate Obstacles (CPE)

📊 Chart of The Day