Will Cap Rates Rise Due To Increasing Interest Rates?

• Rising interest rates has investors questioning if cap rates will rise too

• Interest rates and cap rates are not directly linked

• Historically there are periods when borrowing costs rise while cap rates fall and vice versa

• Factors driving cap rate compression unrelated to interest rates:

  • • Elevated liquidity and lower global returns -> Hunt for yield

  • • Stock market volatility could push investors elsewhere

  • • Upside potential for some segments of CRE drawing new capital

• Focus should be on long-term demographics and the future of commercial real estate

• Some modest upward pressure could be seen in some markets and property types, but unlikely to see broad-based increases