🚨The federal shutdown that began October 1 has stalled key CRE approvals, paused HUD and SBA loan closings, and frozen core economic data releases. Developers awaiting federal permits face delays of 30–60 days or more, while lenders price in uncertainty by widening credit spreads 10–20 bps.
The loss of timely data from BLS, Census, and BEA leaves investors “flying blind,” complicating underwriting and Fed policy signals. Treasury yields eased to ~4.1% on safe-haven demand, but risk-asset spreads have widened, lifting the near-term cost of CRE capital.
10-Year U.S. Treasury Yield: ~4.10% ( –0.10 ppt since Sept 30 ) — [Source: Trading Economics].
CMBS BBB– Spread: +15 bps WoW (~310 bps total) — [Source: Trepp].
HUD 221(d)(4) Loans: New commitments paused since Oct 1 — [Source: HUD Contingency Plan via Reuters].
Loan Performance. No immediate DSCR shock, but delayed HUD/SBA disbursements can create liquidity gaps for construction and bridge borrowers. Floating-rate debt remains exposed if shutdown prolongs and lenders reprice.
Demand Dynamics. Federal-tenant markets (D.C., Northern VA, Maryland) see mild leasing pause; private-sector demand largely intact but confidence softens. Hospitality and retail near federal centers face foot-traffic declines.
Asset Strategies. Developers insert 30–60-day schedule contingencies and extend rate-lock windows. Operators tighten OPEX and preserve cash for carry. Mixed-funded projects sequence state or local approvals first to offset federal delays.
Capital Markets. Agency lending on hold; private lenders add 25–50 bps risk premium and favor stabilized assets. CLO and CMBS deal flow slows until policy clarity returns.
Shutdown stalls permitting and HUD/SBA financing, raising carry costs.
Federal-tenant risk limited short term but mounts after 4–6 weeks.
Lenders add execution-risk spreads; equity capital waits out volatility.
Expect repricing once federal functions resume and data flow returns.
🛠 Operator’s Lens
Refi. Build reserve for potential rent delays on GSA leases; extend rate-locks 60 days.
Value-Add. Pause noncritical capex; reprioritize tenant work funded by federal sources.
Development. Sequence local approvals; model FHA loan delays of ≥45 days.
Lender POV. Banks trim leverage (~60–65 LTV) and favor recourse until shutdown ends.
If the shutdown extends past mid-October, September CPI and GDP data will be delayed, limiting Fed visibility ahead of the Nov 5 FOMC meeting. Expect a “data-dark” pause in rate decisions and elevated market volatility until government reopens.
Reuters — “US Government Shutdown Stalls CRE Projects, Data Releases” (Oct 6 2025). https://www.reuters.com Business Report — “Developers Face Permit Delays Amid Federal Shutdown” (Oct 6 2025). https://www.businessreport.com CoStar — “GSA Leasing Operations During Shutdown” (Oct 2025). https://www.costar.com Trading Economics — “US 10-Year Treasury Yield Chart” (Oct 2025). https://tradingeconomics.com/united-states/government-bond-yield Trepp — “CMBS Conduit BBB– Spread Index Weekly” (Oct 2025). https://www.trepp.com/treppinsights-conduit-loan-spreads
