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In Bisnow, Robert Mangrelli examines the effect that higher interest rates have on commercial real estate investment

June 13, 2022


Rob Mangrelli explains to Bisnow the effect that higher interest rates have on commercial real estate investment.

"We're reaching a place in the benchmark interest rates that's causing investors to reconsider some of their return assumptions about the cost of debt financing," said Chatham Financial Managing Director Rob Mangrelli, who works on the firm's real estate hedging and capital markets team. "There's been a rapid repricing."

Article excerpt

Equity isn't likely to be deterred by higher interest rates, as long as demand and rents are rising.

"There remains something over $150B in dry powder available to private equity investors in real estate, and I'd posit that they're not going to sit on that cash," Mangrelli said. "They're going to put that money to work if they can, and that will provide some level of backstop on activity."

There also remains strong demand for commercial properties from retail investors, such as high net worth individuals, Mangrelli said.

"Some of the large alternative asset managers have clearly shifted their strategies over time, and are looking for some level of inflation protection," Mangrelli said. "Wealth is going to seek asset classes that might perform better in a higher inflation environment."

Interest rate risk management

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