The impact of the Federal Reserve keeping interest rates higher for longer has filtered into a large swath of the economy, including commercial real estate. According to the Wall Street Journal, big banks have set aside large reserves in case the commercial real estate sector begins to truly falter.

Marcus & Millichap CEO Hessam Nadji (MMI) joins Yahoo Finance for the latest edition of Real Estate: The New Reality to give insight into to the connections between the Fed cutting interest rates and the sentiment around commercial real estate.

Nadji lays out some of the correlation between the Fed and the sector: "There's a direct correlation between the groups, the entire sector's valuation movement, and Fed sentiment. We saw a big run-up in the sector's valuations late last year when interest rates were coming in. The 10-year Treasury had peaked around 5% and then boom, all the way back down to 4% and you saw the stock prices go up accordingly and when the Fed basically changed its mind again given the inflation readings of the last couple of weeks coming in hotter than expected and now the notion of delaying the easing cycle you see the stocks are under pressure again so there's a direct correlation between Fed expectations and interest rates."

For more expert insight and the latest market action, click here to watch this full episode.

This post was written by Nicholas Jacobino