Rising interest rates have historically been viewed as a threat to real estate investment trusts (REITs). Yet recent market performance suggests that interest rates alone do not determine how a property, or a REIT, performs. For property owners, developers, investors and lenders, the more important question is whether a property’s cash flow, occupancy, financing structure and market position can withstand changing market conditions.
Recent REIT performance illustrates that distinction. In its September 2026 analysis, Cohen & Steers explains that the relationship between REIT returns and changes in 10-year Treasury yields has shifted over time. Cash flow, supply and demand, and valuations also shape returns.
For the owners, developers, lenders and investors we represent, the practical question is how those factors affect a particular property and the transaction being considered. The answer should inform the financing, deal structure and documents well before closing.
Why This Cycle Is Different
From 2022 through 2024, higher borrowing costs coincided with slower REIT cash flow growth and new supply in several property types. The analysis reports that some of those pressures have eased in 2026 as new supply has peaked and cash flow growth has accelerated.
For existing owners, a slowdown in new development can reduce competition for tenants. For developers, the same financing costs that limit competing projects can make their own projects harder to complete. Whether constrained supply benefits a property depends on local demand, the competing inventory and when new projects reach the market.
That distinction matters when evaluating projected rents and operating income. A national recovery does not eliminate the need to test a property’s assumptions against its own market, expenses and financing obligations.
Performance also varies by property type. Recent sector analysis identifies data centers and senior housing as sectors benefiting from sustained demand, while noting that supply pressures in industrial and apartment markets are easing. Those trends provide context, but they do not establish the outlook for an individual asset.
What It Means Beyond Wall Street
Public REITs are a useful reference point for private real estate, including the markets we serve in Northeast and Central Ohio. However, publicly traded share prices reflect portfolio-level performance and investor expectations. They are not a direct measure of the value or financing prospects of a privately held property.
For private owners, family offices and sponsors, the more useful questions are specific: Is occupancy holding up? Are rents keeping pace with expenses? What competing projects are coming online? And can the property support its debt when the current loan matures?
For new projects, higher capital costs mean developers need disciplined underwriting, a workable capital stack and careful execution. Those who can get projects across the finish line may find less competition when they deliver, provided demand remains sufficient.
For clients holding or acquiring real estate, asset quality, sector exposure and the terms of the underlying documents deserve close attention alongside interest rates. A multifamily owner working through lease-up faces a very different set of negotiations than a senior housing owner benefiting from strong occupancy. Financing and partnership terms should reflect those differences.
Where to Focus Now
Owners and investors should review their obligations while they still have time to negotiate and evaluate alternatives. Several areas deserve particular attention.
Commercial real estate debt and refinancing
Owners considering refinancing commercial property, particularly those with loans maturing in the next 12 to 24 months, should review extension options, prepayment terms, financial covenants and any interest rate cap or swap requirements well ahead of maturity. An extension may depend on notice deadlines, fees, covenant compliance or additional equity. Early conversations with lenders can help identify those conditions and preserve time to pursue other financing.
Acquisitions and dispositions
Higher financing costs make dependable cash flow particularly important to underwriting. Buyers should examine rent rolls, tenant credit, lease expirations, concessions and upcoming capital expenditures. Purchase agreements should also address financing contingencies, diligence deadlines and any negotiated extension rights so the parties understand who bears the risk if financing changes before closing.
Capital partners and joint ventures
When debt proceeds fall short, a project may require additional equity. Operating and joint venture agreements should clearly address capital calls, preferred returns, decision rights and exit mechanics. The parties should also understand what happens if an investor cannot contribute additional capital, including any dilution, member loan or default remedies.
Development financing and public incentives
Tools such as tax increment financing and other public incentives may help eligible projects close funding gaps. Availability, approvals and project obligations vary, so these structures belong early in the planning process. Developers should understand the conditions attached to the assistance and coordinate them with lender requirements and the construction schedule.
Leasing
Where supply is tight and demand is strong, landlords may have more leverage on rent escalations, renewal terms and tenant improvement allowances. Where supply is still being absorbed, flexibility and concessions may matter more. In either setting, the lease should clearly address how concessions are applied, who pays for improvements and what happens if delivery or occupancy is delayed.
Planning for the Property and the Transaction
Rates still matter, but they are not the whole story. For owners and investors, the practical task is to evaluate the property’s cash flow and market position, then structure the financing and legal obligations around realistic assumptions. Strong operating performance can support a transaction, but it does not resolve a looming maturity, an unexpected capital call or an agreement that leaves key risks unclear.
KJK’s Real Estate attorneys advise owners, developers, lenders and investors on acquisitions, dispositions, financing, development, joint ventures and leasing. If you are weighing a refinancing, acquisition or new project, we can help you evaluate the legal terms and structure the transaction around your business objectives. To discuss further, contact KJK attorney Chris Macke (CMM@kjk.com).