Welcome to the first edition of The BlackArc Quarterly. In these newsletters, you can expect timely updates on industry knowledge, investment opportunities, and property developments at the BlackArc. Let’s look at 2023 property projections and insights for potential investors.
Interest Rate Increase
Interest rate projections are expected to rise by .25% – .50% on February 1st. This could lead to significant changes in commercial real estate cap rates. While this may feel like a hit, it’s important to understand that the Federal Reserve is trying to slow the economy with higher interest rates to curb demand and inflation. The anticipated uptrend in interest rates is being driven by a number of factors, including the improving economic outlook, higher inflation expectations, and tightening monetary policies from central banks around the world.
The Impact on Commerical Real Estate
The expected increase in interest rates will have significant implications for the commercial real estate market, as higher cap rates lead to lower property values and potentially reduced investor returns. This is especially true for investors who rely on debt financing to purchase properties, as they will face increased borrowing costs. With this in mind, investors must understand the potential impact of rising interest rates on their portfolios and take steps to mitigate any negative effects.
Cash Flow Focus
One strategy to mitigate negative effects is to focus on cash flow rather than capital appreciation when evaluating potential investments. By focusing solely on cash flow generated by rental income or other operating expenses associated with an investment property, investors can reduce the effect of changing cap rates over time while still achieving positive returns on their investments, regardless of fluctuations in market conditions.
We have seven properties performing well and generating positive returns for our investors. Looking ahead, we have plans to add two more properties to our portfolio in the first quarter of 2023. We aim to expand our portfolio to 20 properties over the next three years. Visit our portfolio to read more.