- The Fed voted to hold rates steady at its first 2026 meeting, maintaining current borrowing costs.
- CRE capital markets remain stable, but deal activity is unlikely to increase significantly without additional rate cuts or narrower spreads.
- Market attention is shifting to Treasury yields and sector fundamentals, especially for multifamily and industrial assets.
- Resilient property types like data centers continue to attract capital despite steady rates.
Fed Decision Delivers Predictability
The Federal Reserve’s decision to keep rates unchanged at the start of 2026 was widely anticipated in the capital markets, reports Bisnow. Industry leaders say this offers needed predictability but is unlikely to prompt a sudden boost in transactions or borrowing activity across most CRE capital markets sectors.
The vote, while not unanimous, signals continued caution in the face of a mixed macroeconomic picture—elevated inflation, strong GDP, and a resilient labor market. Lenders and investors appear to be waiting for more decisive shifts before moving capital off the sidelines.
Capital Markets Reactions
Many experts expect capital markets to remain steady until further rate cuts are firmly on the agenda. Garret Weyand of Cedar Street Partners notes that financing remains expensive, and lenders are still taking a conservative approach, resulting in sidelined deals. JLL’s Allan Swaringen sees stability as a net positive, citing consistent, steady market improvement on both the investment and lending sides since late 2025’s cuts.
Some, including Northmarq’s Pete O’Neil and Altus Group’s Omar Eltorai, expect the focus to shift toward Treasury yields and long-term rates, which have more immediate effects on capital markets and CRE borrowing costs than the Fed Funds rate alone. This follows months of internal debate among Fed officials on the appropriate timing and scale of future rate cuts, revealing ongoing division that continues to shape capital markets expectations.
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Sector Sensitivity and Capital Allocation
Multifamily and industrial remain the most rate-sensitive sectors by transaction volume. Even modest rate movements can dictate project feasibility. Conversely, data centers and medical offices have proven more resilient; robust demand continues to attract capital to these niches, regardless of modest market changes.
Market participants say the pause should not drive significant distress, as many lenders continue to use workout strategies, particularly in multifamily. The general consensus is that stability is preferable to volatility, with most eyes on potential policy shifts later in 2026.
Eyes on What’s Next for Capital Markets
Future changes in the Fed’s leadership and in macroeconomic fundamentals—especially in labor and inflation—are key variables for capital markets. Some predict up to four rate cuts by late 2026 if conditions soften. Until then, experts anticipate steady activity and a modestly improving landscape, with further capital market acceleration hinging on meaningful policy changes.
