Fed's move to cut interest rates could finally spark activity in Bay Area Capital Markets
Bay Area Interest Rates vs Sales Volume
- After the initial shock of the COVID-19 pandemic, negative real interest rates fueled a surge in investments, driving an influx of office sales transactions across the Bay Area.
- In 2022, the Fed's aggressive rate hikes to combat inflation sharply curtailed office sales, leading to a prolonged slump in transactions that has yet to recover.
- Despite rising defaults and severe solvency challenges for landlords facing low office occupancy rates, lenders have been hesitant to foreclose. A lack of buyer interest has prompted many lenders to prefer extending or restructuring loans rather than liquidating assets at steep losses.
- The Fed’s recent 50-basis-point rate cut may soon unlock pent-up demand, setting the stage for renewed sales activity and initiating what many expect to be a generational fire sale in San Francisco’s distressed office market.
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