Rising interest rates and commercial real estate

Illinois developers who are involved in the commercial real estate market may be understandably nervous about how the Federal Reserve's increase in interest rates in December 2015 might affect their future projects. The Fed increased the interest rate by 25 basis points, a move that some believe may result in a resulting move in capitalization rates.

The head of research for the Americas at CBRE Group believes there is little cause for concern. According to him, the immediate result of the Fed's move will simply be a rise in short-term interest rates. He also indicated that CBRE believes certain markets may have more susceptibility to interest rate increases, including New York, Boston and Washington, D.C.

CBRE stated cities such as Atlanta and Dallas are expected to experience less of an effect. The company said the slight impact on the affected markets will be short-lived. The head of research did state that he expects the Fed will eventually raise interest rates by 100 basis points. When it does, he expects to see a larger impact in certain markets across the country.

Savvy investors are smart to watch the effect of rising interest rates on the commercial real estate market. People who are interested in development and investment may want to consult with a business and commercial law attorney. With the rate expected to increase by a total of 100 basis points, people may want to determine whether they should act to invest now before interest rates further increase. An attorney can assist clients by analyzing the market where the target property is located. If it appears to be a sound investment, legal counsel may then help with all of the complex details of the real estate transaction, including loan agreements and other documents.

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