Commercial real estate: Is it too late for borrowers to find good deals?

<p><strong>In-depth episode:</strong> Commercial real estate (CRE) borrowers are taking advantage of an apparent window of opportunity before rates start to increase significantly.</p> <p>However, if you haven’t started working on a deal and want to close before year-end, it’s definitely going to be a challenge.</p> <p>Market volatility has brought an abrupt end to a long summer season of tire kicking just to see what deals are out there, and suddenly CRE borrowers now want to lock in deals.</p> <p>Says Thirty Capital Analyst Jeff Lee: “I don't think anyone's going to really, truly turn one down if it's a good deal. If you can get all your third-parties and everything done.</p> <p>“But it's hard to just flip a switch right now and just say, ‘Let’s get this done by the end of the year’,” he adds. “It’s definitely going to be an uphill climb.”</p> <p>The frenzied activity is being driven by rate increases as tapering nears. Short-term rates started a rapid move upwards on Oct. 15. So the CRE world is busy with a high number of contracts being signed.</p> <p>Analyst Jay Saunders says market volatility will continue as tapering draws near. The Ten-year was up to about 1.70 last week, before dropping a bit. Tapering is expected to be sooner rather than later, but it’s not likely to be an aggressive taper as was first predicted.</p> <p>With the next Fed meeting set for next week, it’s expected that tapering will be formalized, beginning with bonds first.</p> <p>Tapering should be complete in around six months, with one rate increase forecast for 2022, and then two in 2023.</p> <p>Jay notes that the one-month LIBOR is still pretty consistent, just shy of nine bps. One-month BSBY is just shy of six bps.</p> <p>SOFR, which is probably where the lion’s share of LIBOR-based contracts are going, dropped a bit and is back to three bps. Accordingly, one-month SOFR has dropped to 4.3 basis points.</p> <p>If you are borrowing variable rate short-term products, and are looking to hedge via a cap or potentially a swap, stay on top