👋 Hey — Ray here.

Hope you’re having a great weekend. This was the biggest week for rates in three years, and I want to walk you through it carefully, because two different interest rates did two completely different things and they affect you in two completely different ways.

Let's start with the part nobody expected to be the setup.

Wednesday morning, about five and a half hours before the Fed announcement, the Census Bureau released August retail sales. Total retail and food services sales came in at $773.9 billion, up 1.2% from July and up 6.0% from a year ago. July — which had looked like the first genuine crack in the consumer — was revised from a 0.6% decline to a 0.5% decline.

The headline was strong. The number underneath was stronger. The control group, which strips out autos, gasoline, building materials and food services and feeds the consumer spending line in GDP, rose 1.4% against a 0.4% forecast — the strongest nominal gain in that measure since September 2024.

Now let me do the thing I do every week and throw out the categories that have nothing to do with you.

Gasoline stations posted the biggest single-category gain at 3.1%. Ignore it — that's pump price, not traffic. Building materials fell 0.2% and department stores fell 0.8%, and neither is on your rent roll. What is on your rent roll: food services and drinking places +1.2%, health and personal care +0.9%, clothing and accessories +0.7%, general merchandise +0.7%, food and beverage stores +0.4% with grocery +0.5%, and sporting goods and hobby +1.2%. Every strip center category was green.

The restaurant number is the one I'd underline. August was the fifth consecutive monthly gain for eating and drinking places, and in inflation-adjusted terms real sales rose 2.4% year over year — the strongest twelve-month real gain in more than a year, and a departure from the last couple of years when restaurant sales growth was driven mostly by menu prices.

That distinction matters more than it sounds. For two years, when your restaurant tenants reported higher sales, much of that was them charging more for the same number of covers. This is different. This is more covers. Volume growth, not price growth. That's the version that actually supports a rent increase at renewal, because it means the tenant is busier rather than just more expensive.

At 2:00 p.m. Eastern Wednesday, the FOMC raised the target range for the federal funds rate by 25 basis points to 3.75%–4.00%. It was the first increase in more than three years, and the vote was unanimous, 12–0 — notable because three members had dissented in favor of a hike back in July and markets were braced for dissent in the other direction. The statement was two sentences of substance: inflation remains elevated, and the action supports a timelier return to the 2% goal.

Unanimity on a first hike is a real signal. It suggests the committee broadly agrees that inflation risk now warrants a firmer response, even where members differ on how much more tightening is ultimately required. The projections point to the possibility of another increase before year end, and 2027 is nearly a three-way split — eight officials see another hike, six see a hold, four see cuts.

Rate one: the one that already repriced

Here's what actually happened to you. Wednesday afternoon and Thursday morning, JPMorgan, Bank of America, Citigroup, Wells Fargo, KeyCorp, Huntington, Fifth Third, Truist and BNY all raised their prime lending rate to 7.00% from 6.75%, effective Thursday.

If your loan is priced off prime — and a lot of small-bank strip center paper is, as are most lines of credit — your rate moved on Thursday. Not at renewal. Not when your lender gets around to it. Thursday.

On a $3,000,000 floating balance, 25 basis points is roughly $7,500 a year in additional interest. On its own that isn't catastrophic. What matters is the direction, and the fact that the Fed has explicitly said more may be coming. If you've been carrying floating debt on the theory that rates would eventually come down, this week that stopped being a plan and became a bet.

The second-order effect is the one I'd watch if you're contemplating a sale. SBA 7(a) is priced off prime. When prime moves up a quarter point, every owner-user buyer in your bid pool can write a slightly smaller check for the same monthly payment. On a $1.5M–$3M center in San Antonio or the Valley, the owner-user is frequently the buyer paying the highest price, because they underwrite occupancy cost against rent they'd otherwise pay a landlord. Thin that pool and you've thinned the top of your bid range.

Rate two: the one still arguing with itself

Now the rate that prices your next permanent loan.

The ten-year had a week. On Monday it touched 5.014%, the highest since October 2023, before paring back ahead of the meeting. It topped 5.04% going into the decision — the highest level since 2007 — and closed Wednesday above 5% at 5.016% after the chairman's press conference.

Then it reversed. Thursday the ten-year fell more than seven basis points to 4.93%, the thirty-year dropped to 5.282% and the two-year slipped to 4.67%. By Friday it was back above five percent, closing the week at 5.004% with the thirty-year at 5.336% and the two-year at 4.743%.

Up, down, up. Eleven basis points of round trip in forty-eight hours, in the week of the biggest policy move in three years. That is not a market with a settled view.

The mechanic is worth understanding because it's counterintuitive. The Fed controls the very short end. It does not control the ten-year, which reflects what bond buyers believe about inflation and growth over a decade. When the Fed hiked and the chairman talked tough, part of the market read that as credibility — the Fed will get this under control, so long-run inflation expectations can ease, so I'll buy the ten-year. That's Thursday's rally. Friday gave it back.

Practically: the short end moved decisively and permanently this week. The long end moved violently and inconclusively. Your floating rate has a new number. Your next fixed rate has a new range and a wider error bar.

Rate board — week ending September 18, 2026

The deal math — illustrative only, not a rate quote

Before I run numbers, the standing disclaimer: this is illustrative math meant to show you the mechanics. It is not a rate quote, and your lender will give you a different number.

Start with the base. The ten-year closed the week almost exactly at 5.00%. A typical retail lender spread on a stabilized strip center runs 175 to 225 basis points over that base, which puts an indicative fixed-rate range at 6.75% to 7.25%.

Take a $3,000,000 loan on a 25-year amortization. At 6.75%, annual debt service is roughly $249,000. At 7.25%, roughly $260,000. The spread between the good end and the bad end is about $11,500 a year — call it a thousand a month.

Now run it against coverage, which is what the lender is actually solving for. Say the center produces $300,000 of NOI. At 6.75% your DCR is about 1.21. At 7.25% it's about 1.15. If your lender requires 1.25x, you don't clear at either — you'd need roughly $311,000 of NOI at the low end and $325,000 at the high end.

That gap between the two spreads is about $14,000 of NOI. On a $300,000 income stream, that's just under 5%. Which means the difference between a well-priced loan and a poorly priced loan, on the same asset, on the same day, is roughly a full percentage point of rent growth across your entire rent roll. Shopping the debt is worth as much right now as anything you do on the leasing side.

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The Texas statewide average is $3.93 a gallon, up ten cents on the week and $1.14 from a year ago. The national average is $4.44, up sixteen cents on the week and $1.24 year over year. Houston drivers pay the least in the state at $3.83; El Paso the most at $4.41 — and AAA Texas is flagging the possibility of a September record.

That's a fifty-one cent gap between what a Texas household pays at the pump and what the average American household pays. I keep returning to this differential because it's the cleanest structural advantage your tenants have that never appears anywhere in your rent roll.

A household driving 12,000 miles a year at 25 mpg burns about 480 gallons. Fifty-one cents across 480 gallons is roughly $245 a year that a Texas household keeps and the average American household doesn't. That money doesn't go into savings. It gets spent within about three miles of home — which is to say, in a center like yours.

And notice how it shows up in the national data: gasoline stations led all categories at +3.1%. That's not demand. That's consumers spending more dollars for the same number of gallons. Nationally that's a tax on discretionary spending. In Texas, it's a smaller tax.

Tenant background

Two data points from Tuesday worth filing. Boot Barn's preliminary second quarter showed same-store sales improving to about +2% in August and holding at similar levels into September, with improvement across most major categories. Dave & Buster's missed badly on the quarter, though comps did improve sequentially to -2.9% from -5.4%.

The read across those two is the read you've been getting all year, and August retail sales confirmed it. Value and necessity are holding. Big-ticket destination entertainment is not. If your merchandising mix leans toward the first group — grocery-adjacent, medtail, QSR, fitness, personal services — August was a good month. If you have a large-format entertainment or discretionary box, that's where I'd be spending my attention on the lease file.

Call your lender if you're floating. Get your current rate in writing, and ask what a swap or a fixed-rate conversion costs you today. You're not obligated to act on the answer. You are obligated to know it.

Pull your 2027 and 2028 maturities onto one page. Put current in-place NOI next to each one. The assumption that you'd refinance into a lower rate has now been contradicted by the Fed itself, and that's worth seeing on a single sheet rather than in your head.

If you've been waiting on a sale decision for rates to improve, re-examine the premise. The Fed just signaled it may be going the other direction. That changes the calculus on waiting, and it changes it for the owner-user segment of your bid pool first.

Your tenants had a good month. Your capital stack had a hard one. Those two things are both true, and this week they were causally linked, which is new.

If you own a strip center and want to walk through what this means for your specific property — your rate, your maturity, your tenants, your hold-period strategy — reach out. That's what I do.