422. From the Fed to FedEx: Warsh’s First Rate Hike, $6.6B in Amazon/FedEx Exposure, and Three Paths for Office

Haley Keene (0:06)

Welcome to The TreppWire Podcast, the show where commercial real estate meets data and insights. This is our Week in Review for the week ending September 18th, 2026

I'm Haley Keene with Trepp, a data modeling and analytics firm for the CNBS, commercial real estate and CLO markets. I'm with Lonnie Hendry, Chief Product Officer and Stephen Bushbaum, Head of Applied Research and Analytics. This week, the Federal Reserve unanimously raised interest rates by 25 basis points, bringing the federal funds range to 3.75 percent to 4 percent. It was the Fed's first rate increase in three years, and 16 of 18 officials now expect at least one more hike before year end. The decision came after the 10-year Treasury crossed 5 percent for the first sustained period since 2007

But the economy isn't exactly rolling over. August retail sales rose 1.2 percent, beating expectations, while the control group used in GDP calculations jumped 1.4 percent. So consumers are still spending, the labor market remains resilient, and growth estimates are moving higher. At the same time, energy costs are climbing, businesses are struggling to set prices, and the Fed is tightening again. That's a tension worthy of enough discussion to fill an entire episode, but we'll keep it tight today as we have a lot to cover this week. On today's show, we'll also discuss a new $1.1 billion office credit fund, emerging risks for properties leased to the federal government, and the anchor tenant exposure hiding inside industrial CMBS. That includes $6.6 billion tied to Amazon and FedEx, and a potentially important rollover risk within the FedEx portfolio.

So Stephen, was the quarter point hike itself the big story this week, or was it the signal that the Fed may not be finished?

Stephen Bushbaum (1:58)

Well, the quarter point hike was largely priced in.

Ahead of the meeting, markets had assigned it a more than 90 percent probability before the announcement, which was amazing because we had started out, I think, maybe at 60 percent a few weeks before that, and it just ratcheted up higher and higher. The more important signals were the unanimous votes, and the fact that nearly every Fed official expects at least one more increase this year, or if we want to call it this cycle. I don't know that we can call two to three hikes a cycle, but let's pretend that it's a cycle. The Fed is looking at an economy that remains strong enough to tolerate higher rates. In fact, in the press conference, Warsh even said, and he said this multiple times, I think dating back to Jackson Hole, this doesn't look like we're in economy with restrictive monetary policy. In other words, we can hike and it might cool things a bit. We're not in restrictive territory.

Unemployment has fallen to 4.1 percent, hiring is stabilized, and the 1.4 percent increase in the retail control group led economists to raise their third quarter GDP forecast between three and three and a half percent. But inflation has stopped improving. The war with Iran has pushed oil and diesel prices higher, while AI and data center buildout is adding investment demand in a time when power, equipment, and construction capacity are already constrained. The difficult part is that higher rates can't produce more oil, it can't expand refining capacity, and it can't meaningfully slow AI projects where the capital is already committed. What the Fed can do is cool the rest of the economy, and Syria remains one of the most rate-sensitive places where tightening shows up. The 10-year Treasury has already moved above 5% before this decision, rising more than 20 basis points in the five days leading up to that point. At that level, refinance proceeds shrink, fewer acquisitions pencil, and extending alone doesn't necessarily solve the underlying capital gap. But I wouldn't automatically treat 5% as a permanent floor. Long-term inflation expectations haven't moved dramatically, and the latest increase appears to have been driven primarily by expectations for higher short-term policy rates. If energy prices ease or the Fed restores confidence that inflation is under control, long-term yields could actually come down really quickly. That's where I want to pause here for a minute, Lani. Things could go a number of different directions.

Oil has just been on a blast up this past week, and it doesn't look like those tensions are going to ease. I'm sure you've read some of the similar headlines I have. There's a lot of doom and gloom out there about oil. If oil and rates are fairly heavily intertwined for the short term, where do we go from here? Do you think we persist? Do you think we could actually take another leg up if oil goes to 120? How are you feeling about state of affairs?