The Azucena Take: Investor Confidence and the Commercial Real Estate Market 2022

Early this year; Marcus & Millichap partnered with Wealth Management Real Estate to conduct the Investment Sentiment Survey. This was to get an understanding of how confident investors were about the market and what their concerns were. Despite concerns about inflation and interest rates, many continue to have confidence in the economy. 

When this survey was conducted back in January, investor sentiments were reported to be at 170 points. That is the highest since 2015 and one of the highest since the survey began. The idea of the Feds raising interest rates and inflation was on everyone's mind at the time. 

The concerns of inflation and interest rates have now taken center stage as the Federal Reserve has announced its plans for 2022. This includes policies of quantitive easing by reducing how much debt and securities it will purchase while also raising interest rates several times.  

How much they will rise will also affect how willing are investors to purchase in 2022. Most investors won't scale back if interest rates rise between 50 to 100 bases points (BPS). Once interest rates hit 150 BPS or more then most investors are going to scale back.  

Here is the breakdown:

  • Interest up by 50 BPS then 6% of investors will scale back.

  • Interest up by 100 BPS then 19% of investors will scale back.

  • Interest up by 150 BPS then 46% of investors will scale back.

  • Interest up by 200 BPS then 63% of investors will scale back.

It should be noted that the Federal Reserve doesn't have complete control over interest rates. Their action could influence interest rates but it doesn't mean it will jump by what they aim for. There will be a number of market factors also at play. 

The overall takeaway is that now is the best time to get active. If you are planning to buy, the low-interest rates are still here. If you want to sell, there are more buyers now than there will by the Summer season. Smart investors need to look at their options, speak to market experts and plan accordingly. 

The Azucena Take provides an inside look into the investment real estate market using the research done and data collected by Marcus & Millichap.

Carlos Azucena