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Commercial Property in a Rising Interest Rate Environment

October 28, 2022

With interest rates making headlines these days, many borrowers are re-evaluating their commercial property portfolios to ensure they are managing interest rate risk appropriately. If the right opportunity becomes available to grow your portfolio, is it worth potentially foregoing the investment because of rising rates? Interest rates will always fluctuate, so instead of delaying your next acquisition or refinance in the current environment, first consider all of the options available so that you can make a truly informed decision.

Here are four things to consider as you explore financing commercial real estate in a rising interest rate environment:

Lock in early on any existing loans 1. Lock in early on any existing loans. If you have a loan maturing in the next 6 - 8 months, look into locking in a lower interest rate prior to maturity. This will protect your payments while reducing future interest rate risk. MCAP has a broad range of options available to assist you.
Leverage current equity to reduce borrowing needs 2. Leverage current equity to reduce borrowing needs. If you have built up equity in an existing property, consider accessing this equity through a refinance or top up arrangement so that you can use that equity toward your next purchase, or for capital improvements to existing properties. This will limit the amount you need to borrow in the future at potentially higher rates.
Diversify your loan terms 3. Diversify your loan terms. When seeking financing for a commercial acquisition, or when refinancing your existing assets, you will have several mortgage options to choose from. By maintaining a mix of mortgage maturity dates, you can take advantage of favourable movements in the market while protecting against future interest rate changes.
Search for deals 4. Search for deals. A rising interest rate environment can result in lower purchase prices for property, particularly if buyers are prepared to negotiate and close quickly. MCAP regularly assists its clients with short term bridge financing to facilitate quick closings, with a low interest rate and long-term financing available thereafter.

How can MCAP help?

If you are looking to acquire or refinance a commercial property, contact our team of experienced originators today and we can assist you in navigating the current interest rate environment to ensure the continued successful growth of your business.

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