Cushman & Wakefield recently published their Capital Markets Update for September, 2014.
“There was quite a bit of volatility with both base rates (UST and Swaps) and spreads during the month of August. The 10-Yr UST started the month at 2.52% and ended the month at 2.35%. After 10-Yr Sr AAA conduit issuances generally sold in the S + 70s range in July, spreads moved out to as a high as S + 90 in mid August. Net effect was generally flat borrowing costs to borrowers, but increased volatility led to some uncertainty during the month.
Bloomberg reported that CMBS spreads will be tested again this month as $15 billion of offerings are planned to hit the market, the highest monthly tally since the market peaked in 2007. The increase in spreads last month was largely associated with geopolitical risk, but supply and demand levels will be determined in September.
As investors speculate the Federal Reserve may raise short term rates, the spread between 5- and 10-year UST yields has been steadily narrowing since a recent high of 1.39% in December 2013 to 0.70% during the last week of August. This is the tightest that it has been since December 2008.
RCA reported that the Moody’s/RCACPPI all property national aggregate was up 4.2% in Q2 2014 and 16.0% over the past year. This brings the index to within 98% of previous peak levels. However, the range is broad with hotels and retail prices still well below peak levels while apartments and CBD office prices are well above peak. Industrial saw the largest gains in the past year at 18.7% and retail saw the smallest gains at 11.3%.”