Why Today’s CRE Basis Could Be Tomorrow’s Opportunity

This WSJ headline is exactly what CRE investors need to hear: “Bond Yields Could Come Down as Fast as They’ve Climbed.”

The author’s thesis for lower rates is different from my perspective on why we could ultimately see rates come down, but there are some great points in the article.

At some point in this cycle, employment will likely face real pressure, whether from AI, slower economic growth, or other factors. If that happens, the rate environment could look very different than it does today.

That’s what makes the current CRE setup so interesting. You can buy commercial real estate today with the 10-year Treasury above 5%. And in Los Angeles multifamily, we are seeing properties trade at basis levels we haven’t seen since roughly 2014.

In the short term, it can feel like rates can only go higher. But to the author’s point, rates can move back down just as quickly as they moved up.

The main question buyers of LA multifamily need to ask is what today’s basis looks like five or ten years from now.