Capital Markets: Riding the Rate Roller Coaster

February 24, 2023

The transition to a new environment has already begun. As 2023 opens, volatility and uncertainty have increased in US capital markets.

Our February program and luncheon included a dynamic panel of experts who shared the impact of fluctuating interest rates on CRE Cap Rates, development and valuations. 

Moderated by Amy McCook, senior vice president of Equinox Development, panelists included:

  • Bryan Borland, Managing Director at Wood Partners
  • Adam Ercoli, Director of Commercial Banking with Fieldpoint Private
  • Erik Nelson, Vice President of Acquisitions at National Retail Properties

Through the discussion, we were reminded that capital is the lifeblood of our business. The economy will likely slow in the coming quarters, but we are seeing some encouraging trends, including the strengthening of industrial investments. Experts believe the markets are establishing a solid, fundamentals-driven platform for future growth.

Our panelists shared their perspective on how investors can navigate this current market:

“While our peers have added industrial and even office over the last five to 10 years, we’ve always been 100 percent retail - it’s what we’re good at and it’s what we know. That’s probably why we have 33 years of consecutive increases in dividends … we’ve been focused. I think you get in trouble in an uncertain or transitional environment when you try to jump from asset to asset.”  -Erik Nelson, VP Acquisitions at National Retail Properties

“Cap rates can only go so low and we can only absorb increasing construction costs for so long. So now it’s about finding that equilibrium. It’s going to take some pain to get there. Land alone won’t solve it. Insurance alone won’t solve. Construction costs have to also balance out. 

We need some combination of rent growth, and lowering construction costs to get us out of this.” -Bryan Borland, Managing Director of Wood Partners

“Stick to your strategy. If your strategy has been multifamily, office, mixed-use, whatever type of asset it’s been, stick to that. Don’t deviate from the asset class that you know and the models you know. Just because the returns may not be there in the short-term, think about the long-term and focus on what you know.” -Adam Ercoli, Director of Commercial Banking with Fieldpoint Private

Special thanks to our February program sponsor, Spectra Contract Flooring.

Join us on March 8 for next month’s program, “Multimodal System at OIA.” Details and registration here