The Federal Reserve Open Market Committee raised the short-term Federal Funds rate on March 22, 2005, to 2.75 percent – its highest level since the fall of 2001. Combined with the March 23 CPI report showing core prices up by a greater-than-expected 0.3 percent in February, inflation and interest rates appear to be stirring. If 10-year Treasury yields remain below 5.5 percent this year, investor demand for real estate should remain strong. A sharper spike in rates could cool demand and cause some headaches for the owners of Class B properties financed with floating rate debt.This information was provided by Bob Bach, national director, Northbrook, IL-based Grubb & Ellis Co. (www.grubb-ellis.com).
