Welcome to SVN® International Corp.’s latest commercial real estate economic update — keeping our clients up-to-date on the trends shaping today’s market.
Fed Rate Hike Drives This Month’s CRE Economic Update
The Federal Reserve raised interest rates for the first time since 2023. It lifted the benchmark Fed Funds rate 25 basis points to a range of 3.75%–4.00% following its September 16th meeting. The move came after August’s CPI report surprised to the upside. Headline inflation held at 3.4% year-over-year as energy costs re-accelerated amid renewed conflict in Iran. Core inflation, though, cooled to 2.4% — its lowest annual reading since March 2021.
The Fed’s updated projections signal one more hike is likely before year-end. Rates aren’t expected to return to the 2.0% inflation target until 2029. The 10-year Treasury closed at 5.01% on decision day. That reset financing costs meaningfully higher across all major commercial property types. For real estate investors, “higher-for-longer” is no longer temporary — it’s a multi-year reality.
CRE Fundamentals: Mixed but Stabilizing
This section of our commercial real estate economic update looks at property-level performance. Fundamentals showed a mixed but broadly stabilizing picture in August, according to MSCI-RCA data. Overall property prices ticked up just 0.1% both monthly and annually. CBD Office led all sectors, growing 9.4% annually. Apartment prices kept falling, marking a 10th straight month of declines and now sitting 23% below their 2022 peak.
Office fundamentals showed early signs of recovery, per NAR’s Q2 2026 report. Annual absorption turned positive for the first time in two quarters. CMBS special servicing activity, meanwhile, ticked up sharply — particularly in mixed-use and office loans — signaling lenders are getting ahead of potential distress.
On the housing side, builder confidence fell to its lowest level in a year. Elevated mortgage rates and rising costs weighed on new construction. Over time, this could bolster demand for rental housing alternatives. Retail sales, on the other hand, rebounded 1.2% in August. Consumer spending remained resilient, up 6.0% year-over-year — a sign the broader economy is holding up even as financing conditions tighten.
Want to see how these trends could affect your next deal? Contact our team or explore our current listings for opportunities across every major property type. You can also catch up on our previous economic update for additional context.
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