On May 9, Boston Fed President Eric S. Rosengren delivered a speech entitled “Trends in Commercial Real Estate” at a conference in New York. Mr. Rosengren’s remarks addressed a variety of factors influencing the market, analyzing favorable conditions as well as potential concerns.

Mr. Rosengren noted the “tailwinds” that have allowed for rising commercial real estate valuations, including low and stable inflation, accommodative monetary policy, and the relative economic strength in the U.S. compared with the rest of the world. In addition, with respect to multifamily commercial real estate in particular, Mr. Rosengren discussed the positive impact of several broader societal trends – including later marriage age, “greater urbanization and a preference among the large cohort of millennials to seek multifamily accommodations.” The Boston Fed President cautioned, however, that the conditions may not warrant the extent of the price increase in the market, and pointed to the “significant exposures” that leveraged institutions and the GSEs—whose holdings include significant guarantees of multifamily loans— have to commercial real estate. He also noted that the commercial real estate market could suffer further shock if regulatory and legislative proposals require the GSEs to reduce their holdings of multifamily loans.