Rising rates will push borrowing costs higher, but commercial real estate investors should not be discouraged. Although interest rates are expected to rise and capitalization rates may trend upwardâ€”rates are still well below historical norms, and even the most hawkish policymakers are calling for a gradual normalization process.
-Commercial Real Estate Sector
The commercial real estate sector should continue to see tailwinds from strong job creation and steady economic growth. Investors should prepare for higher interest rates in the coming yearsâ€”with the understanding that the peak of the business cycle will bring new opportunities for the commercial real estate industry. Demand for living and working space is growing in tandem with the broader economy, and marginally higher borrowing costs should be offset by the positives that accompany a strong business environment.