The 10-year Treasury yield has stayed near 5%, compressing the spread with commercial real estate cap rates to a record low, especially impacting multifamily and industrial sectors. Cap rates are expected to rise 40-60 bps, causing property values to drop 6-10%. Prime office and retail assets, with wider spreads, will be less affected. Higher rates will reduce investment activity short-term but create opportunities in debt and select sectors. Rates may stabilize and decline by 2027, boosting investment later.
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