In the world of commercial real estate, change is constant—but few shifts have felt more immediate or more consequential than the sharp rise in interest rates over the past 18 months. As advisors to investors across U.S. markets, we’ve been closely tracking how this volatility is affecting deals, valuations, and the legal strategies surrounding debt and equity structures. It’s not just about the cost of borrowing—it’s about recalibrating your expectations, your underwriting, and in many cases, your entire investment approach.

Rising interest rates directly impact the cost of capital. For investors relying on leverage, the economics of a deal can change overnight. A property that penciled out six months ago may now yield negative leverage, where your borrowing costs outpace your projected returns. We’re seeing many clients revisit their debt assumptions, stress-test pro formas, and renegotiate terms mid-deal as lenders tighten standards and reprice risk. Bridge financing, once an easy go-to, now comes with higher rates and shorter fuses—adding urgency to refinancing timelines and exit strategies.

But the impact doesn’t stop there. Interest rate volatility is also influencing cap rates—and by extension, property values. As rates climb, cap rates tend to follow, especially in markets where fundamentals are softening. The challenge is that rising cap rates reduce asset values, and that can disrupt everything from acquisition pricing to loan-to-value ratios. Sellers are holding onto yesterday’s valuations, while buyers are underwriting for today’s risk. That disconnect is contributing to slower deal velocity and prolonged negotiations across asset classes.

We’re advising clients to be more selective and disciplined than ever. This isn’t a market for assumptions or aggressive projections. It’s a time to lean on hard data, realistic debt modeling, and well-structured contracts that leave room for uncertainty. In particular, we’re helping investors incorporate more flexible financing terms, stronger protections in joint venture agreements, and clearly defined exit provisions to guard against shifting market conditions.

For clients with existing portfolios, interest rate spikes are creating refinancing pressure—especially for assets purchased or stabilized during the low-rate environment. Maturities that once looked manageable may now require equity infusions or creative workout solutions. In some cases, we’re working with clients to restructure loans or engage with lenders early to explore options before maturity defaults become unavoidable.

Still, we don’t see this as a doom-and-gloom scenario. For well-capitalized investors, market dislocation can present real opportunity. Sellers facing financing pressure may be more willing to negotiate, and off-market deals are surfacing more frequently. The key is having the right legal and financial structure in place to move quickly and safely when those moments arise.

We’re also seeing many of our clients diversify—exploring markets with stronger fundamentals, revisiting alternative asset classes, and rebalancing portfolios to hedge against prolonged volatility. From legal due diligence to fund formation, the goal remains the same: protecting downside while staying nimble enough to capitalize on upside.

Interest rate volatility may feel like a headwind, but it’s also a reminder of why strong planning matters. We’re here to help our clients assess risk, seize opportunity, and structure deals that can weather the cycle—however long it lasts.

If you’re navigating a deal, facing a refinancing deadline, or reassessing your CRE strategy in light of today’s rates, we’re ready to advise and advocate for your success. Let’s talk about what the numbers mean—and how to turn volatility into value.