Higher borrowing costs are cooling investor activity—but creating unexpected opportunities for tenants in key markets.
The Interest Rate Effect: A National Snapshot
Key Impacts:
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Investment Slowdown: CRE purchases down 18% YoY as cap rates expand (Q2 2024).
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Refinancing Squeeze: 28% of office loans maturing this year face debt service coverage ratio challenges.
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Flight to Quality: Only 12% of new leases are in Class B/C buildings (vs. 34% in 2021).
Regional Winners & Losers
Most Vulnerable:
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Sunbelt Oversupply: Austin (-14% asking rents for Class B), Charlotte (-9%)
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Secondary Markets: Low-density suburbs with long commutes
Unexpected Beneficiaries:
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Northeast Corridor: Boston (+3% rents) as life sciences backfill space
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“18-Hour Cities:” Philadelphia, Denver seeing influx of cost-conscious finance/legal firms
The New Tenant Playbook
Smart Moves Right Now:
✔ Short-Term Leases: 41% of new deals are ≤3 years (vs. 22% pre-pandemic)
✔ Concession Hunting: Avg. 8.2 months free rent in struggling downtown towers
✔ Expansion Rights: Lock in options before rates potentially fall
