Company: MMI
Filing Date: 2025-05-07
Form Type: 10-Q
Source: 0001578732-25-000031
Chunk: 133

Company: Marcus & Millichap, Inc.
Filing Date: 2025-05-07
Form: 10-Q
Item: Part I, Item 2
Chunk 133
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 turmoil driven by aggressive trade policies has spurred increased interest rate volatility. Interest rate risks were exacerbated by President Trump’s threats to remove Jerome Powell as the head of the Federal Reserve, risking the independence of the Federal Reserve. While lender spreads had been tightening, the rising risk of inflation, policy uncertainty and financial market volatility have led to increased lender caution. Although debt capital liquidity remains strong, many lenders have increased their safety spreads, resulting in a modest increase in lending rates.

The combination of limited federal policy transparency and inflation risks posed by tariffs have caused the Federal Reserve to await further clarity before making any decisions on monetary policy. The prevailing sentiment by Wall Street is that the Federal Reserve will cut rates two or three times this year, but Chairman Powell has clearly stated that until clarity emerges, they will likely hold the overnight rate flat. Nonetheless, the Federal Reserve’s influence on longer term rates like the 10-year treasury, which more directly influence commercial real estate lending rates, is limited. Following the institution of the “Liberation Day” tariffs, international capital began to migrate out of U.S. bonds and financial assets, putting upward pressure on interest rates. Looking forward, long-term rates may be more influenced by international capital flows and treasury issuance than by the Federal Reserve.

Although economic uncertainty together with financial market and interest rate volatility normally tend to increase investor caution, capital flows into commercial real estate could potentially be bolstered. As a “hard asset” with some level of resistance to inflation, recessions and financial market volatility, investment into commercial real estate could benefit from the current economic climate. The repricing of commercial real estate assets over the last three years has enhanced the yield profile, supporting positive or neutral leverage in many markets and property types. Whether capital migrates to commercial properties will likely depend on the risk perception of the broader financial market, but other hard assets have already experienced increased demand in the wake of the rapid policy shifts and financial market downturn.

Investor Sentiment and Investment Activity

We facilitate investors buying, selling, and financing properties in order to generate commissions. Investors’ desires and need to engage in real estate transactions are dependent on many factors that are beyond our control. The economy, supply and demand for properly positioned properties, available credit and market events impact investor sentiment and, therefore, transaction velocity. In addition, our private clients, who make up the largest source of revenue, are often motivated to buy, sell and/or refinance properties due to personal circumstances, such as death, divorce, partnership breakups and estate planning.

In the first quarter