Interest Rates and Real Estate

Real estate runs on borrowed money, and REIT dividends compete with bond yields. That makes REITs especially sensitive to interest rates. Here is how rates affect real estate and what 2026 has looked like.

Three ways rates hit real estate

• Borrowing costs: REITs refinance debt regularly; higher rates squeeze profits.
• Property values: buyers pay less for a building when they can earn more on safe bonds.
• Income competition: a 5% REIT yield is less appealing when Treasuries also pay about 5%.

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