The rising interest rate environment raises concern about the potential impact on US commercial real estate property values and investment performance. This is causing real estate investors to fear that rising interest rates will cause capitalisation rates to rise and property values to fall, resulting in weaker total returns.

Historical data show that higher interest rates do not necessarily result in lower property values and total returns.

A number of factors may help to protect overall real estate performance, including capitalisation rate spreads over the US 10-year Treasury yield, and the outlook for economic growth and real estate market fundamentals.

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