After two years of volatility, a more stable interest rate environment is helping drive increased transaction activity in retail real estate, according to a senior capital markets expert.
“From year to date, we’ve seen a steady decline in interest rate and since we’ll call it January, February, March timeframe, interest rates have been at the benchmark. Rates have been trading in a very tight band, and as a result, the financing has become more predictable,” says J.B. Bruno, Senior Director at JLL.
The Impact of Rate Stability
This marks a significant shift from the turbulent period of 2023-2024, when rate volatility created challenges for deal execution. Bruno explains that because retail is typically viewed as a stable product type, the sector is particularly sensitive to treasury rate movements.
“Between 2023 and 2024 there was quite a bit of volatility, because retail is a very stable product type. We keep our eyes very closely fixated on what’s going on with US treasuries,” he notes.
Competitive Lending Environment
The stabilization of interest rates has aligned with a resurgence of lender activity in retail assets. According to Bruno, several capital sources are now stepping up their involvement: banks are reentering the market with competitive pricing, life insurance companies are actively seeking retail opportunities, and the CMBS market is offering viable options, particularly for large-scale power centers.
Local Market Considerations
While the financing environment has improved, Bruno notes that local market dynamics still play a crucial role in investment decisions. “New Jersey is, I think, sometimes characterized as not being the most business friendly state, despite the fact that we’ve got great population fundamentals and great proximity to New York City,” he says.
This highlights the ongoing tension between strong market fundamentals and policy considerations that investors must navigate. “Some of the local politics, I think, are sometimes viewed unfavorably by investors, getting someone comfortable with New Jersey, New York, Connecticut, relative to other geographies where the political landscape may be perceived as ‘more business friendly’ remains a challenge,” according to Bruno.
