SOFR

SOFR in Commercial Real Estate

SOFR in Commercial Real Estate

Most commercial real estate loan interest rates are currently set by using the LIBOR (London Interbank Offered Rate) as a benchmark. LIBOR is calculated by measuring the interest rates at which banks lend to each other (specifically short-term, unsecured lending). However, due to a variety of reasons, banks are set to stop reporting LIBOR rates in 2021. SOFR (Secured Overnight Financing Rate) is the index set to replace it— but how will this affect commercial real estate lending? Let’s take a look.