The 10-year Treasury hits 5%. Here's what it could mean for Tampa investment sales
The 10-year Treasury yield hit 5% on Sept. 14, reaching its highest level since 2007. Because the benchmark serves as the foundation for many commercial real estate loan rates, the move has renewed questions about whether borrowing costs could slow investment activity in Tampa Bay.
The rise in Treasury yields has not occurred in isolation. Recent inflation data showed price pressures picking up in August, prompting investors to reassess interest rate expectations and pushing long-term Treasury yields higher. For commercial real estate, higher Treasury yields translate into a higher cost of capital for acquisitions, refinancings and development projects.
While the yield has become a closely watched gauge for investors, local market participants say the psychological impact may be just as important as the direct financial effect.
“From my perspective, 5% is a number people react to before they run the math,” said Paul Carr, senior vice president at CBRE. “The actual increase in borrowing costs may not be enough to fundamentally change a deal, but crossing a threshold like 5% can influence sentiment and cause investors to pause.”
Tampa's recent sales history shows how investment activity has shifted alongside interest rates. Nearly $5 billion in commercial real estate traded during the fourth quarter of 2021, when the average 10-year Treasury yield was around 1.5%.
As borrowing costs increased throughout 2022 and 2023, quarterly sales volume generally settled into a lower range, often between $1 billion and $2 billion. Higher financing costs contributed to a slower investment environment than the ultra-low-rate period that fueled record sales volumes in 2021 and early 2022.
Carr said today's market remains active despite higher rates, with buyers and sellers adapting to a capital markets environment that looks very different from what it did a few years ago.
Others echoed that view, noting that investors have spent more than three years adjusting to rate volatility.
“Treasuries have a direct correlation to interest rates, which a lot of investors account for when transacting,” said Ari Ravi, executive vice president with Ripco Real Estate, a New York-based brokerage firm that specializes in retail leasing and investment sales. “We've been dealing with this roller coaster since mid-2022, so this uncertainty seems par for the course. That said, the Tampa MSA and Florida seem to hold strong relative to most of the country, but this is another hurdle to deal with.”
Ravi added that sales velocity has remained below the pace seen during the low-interest-rate environment of 2021 and 2022 and said investors will be watching closely to see whether that trend continues if Treasury yields remain elevated.
For now, brokers say the market is still finding ways to transact. But investors will be watching closely to see whether Treasury yields remain elevated and what that could mean for deal activity heading into 2027.
(CoStar Analytics | By Michelle Rumore)
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