Rising Treasury yields and inflation have renewed concerns about CRE, but real estate performance is influenced by a combination of inflation, real rates, credit conditions, and economic growth, not any single factor.
What are we seeing?
- The most challenging environment for CRE is falling inflation alongside rising real interest rates.
- Even in this scenario, private CRE has historically delivered positive returns, supported by income generation.
- When property values face pressure, net operating income growth and strong balance sheets become critical drivers of performance.
- Unlike 2022, credit remains available today, though performance gaps across assets, markets, and managers are likely to widen. Success will depend not only on inflation and rates, but also on market conditions, access to capital, and economic fundamentals.
Performance depends not simply on the level of inflation or interest rates, but on their direction, the speed of change, credit availability, and the underlying health of the economy. Find out more in our latest paper.
Principal Asset Management
