The Fed Move and CRE

The Federal Reserve’s decision Wednesday to not raise its benchmark interest rate again was welcome relief to commercial real estate finance. Still, uncertainty persists given the central bank did not rule out further rate hikes this year. Meanwhile, the latest hurricane season should prove a pivotal one for Florida’s property insurance market.

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— Tom Acitelli, Co-Deputy Editor

Federal Reserve Boosts Commercial Real Estate With Pause in Rate Hikes

A commercial real estate industry hammered by large-scale interest hikes since March 2022 received some relief Wednesday when the Federal Reserve opted for a pause in its hawkish inflation-fighting strategy. Still, the central bank provided little indication that it was done raising rates this year. The Fed announced Wednesday afternoon its benchmark interest rate would remain unchanged at between 5 and 5.25 percent. The decision followed 10 consecutive increases that dramatically raised borrowing costs for CRE market participants over the past 15 months. The central bank did, however, keep the door open for future rate hikes in 2023 depending on inflationary trends.

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Florida's Property Insurance Market Confronts a Pivotal Hurricane Season

Florida’s intervention in property insurance has put the state government in the eye of a hurricane-battered market that is uninhabitable for some private insurers and unaffordable for many policyholders. Even as the new hurricane season gets underway this month, the state is still recovering from Hurricane Ian, the Category 4 storm that crushed Southwest Florida last year. Ian has rocked, but not wrecked, the odd structure of Florida’s property insurance market — anchored by a state-run property insurer and a catastrophe fund that shields insurers from a portion of their hurricane claims. The question is if the market is ready to weather the next one.

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