How will interest rate increases affect cap rates, commercial real estate values and investors ardor for commercial properties?
Probably not that much, in the opinion of several NAIOP Distinguished Fellows. First, rates are not expected to rise dramatically any time soon. As Dr. Malcolm Richards, Director of the Real Estate Center of Texas A&M University in College Station, Texas, observed, – I would be very surprised to see rates rising a lot in the next six to 12 months.” Second, the modest increases already announced had been well anticipated and factored into the market; and rates are still so low that the effect may be neutral, noted Dr. Stephen S. Fuller, Professor of Public Policy and Regional Development at George Mason University’s School of Public Policy in Fairfax, Virginia. Dr. Fuller also pointed out that some metro areas and submarkets are faring very differently than others; that is, job growth is a significant determinant of a market’s strength and more of a factor than interest rates. Third, the flow of capital to real estate, particularly from pension funds, is not likely to abate, the Disting
