The Forces Driving Interest Rates Lower – Will They Last?

Cooling Jobs Data Signals Evolving CRE Risks and Opportunities

Job Revisions Spurs Fed Cut Expectation​

• 258,000 jobs were erased via revisions to May and June reports​

• Labor force participation has dropped 40 bps since April​

• Markets now assign a 95% probability to a 25 bps Fed cut in September, and see over a 50% chance of 75 bps​

Fed Cuts Don’t Guarantee Lower CRE Borrowing Costs​

• Fed and Treasury rates don’t always move in sync — in Sept. ’24, the Fed cut rates, but 10-Year Treasury yields climbed​

• Inflation remains a wildcard that could block Fed cuts​

Slowing Economy Could Reshape CRE Demand​

• Slower job growth could weigh on household formation and weaken consumption in-turn impacting retail and industrial space demand​

• Slowing CRE construction could mitigate weaker demand​

Sources: Marcus & Millichap Research Services, BLS​​

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