With bond yields on a rollercoaster and mostly rising fervently in recent weeks, asset values of all stripes have been negatively affected. Real yields have risen while future inflation expectations remain surprisingly well anchored. Even with a rally, albeit bumpy, to begin October, equities (including REITs) and bonds have been hit hard by the dual bear markets in these key asset classes.    

Rising real rates do damage to values, while higher inflation is benign. That this year’s rate spike has been primarily a function of higher real rates explains the weak start to the year. Seldom has the range of economic possibilities been as varied as it is today. Recession odds are up even as interest rates have jumped in reaction to the release of the inflation genie. The spike in yields has clobbered REIT share prices this year, and property prices have begun to drift lower. Today’s investment professionals lack experience to help assess the impact that stubborn inflation might have on real estate, but lessons from past interest rate/inflation scares offer insight.  

Non-performing commercial real estate debt on the biggest banks’ balance sheets doubled last year, but remains a sliver of total holdings – dashing hopes of   a buying spree for opportunistic investors. The level of troubled debt is expected to tick higher, stoking optimism that more distressed opportunities could shake loose down the road.  

Commercial Mortgage Alert, one of Green Street’s four weekly News publications, conveys the earliest look at today’s commercial MBS and traditional real estate debt markets. Highlights from this issue include REIT-Bond Volume Reaches Historic Highs, CMBS Pros Sharply Split on Spread Outlook, Crisis Complicates BofA Syndication Effort, RANKINGS: Risk-Retention Holders, REIT Bookrunners.

Real Estate Alert, one of Green Street’s four weekly News publications, provides exclusive intelligence on behind-the-scenes deals and dealmakers in today's commercial property market. Highlights from this issue include Total Sales Down 39%; CBRE On Top at Half, Retail Sales Plunge 54%; Eastdil Holds Lead, 3 Seattle-Area Development Deals on Market, RANKINGS: Overall, Retail.