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Why CRE Investors Should Not Count On A Return To Low Rates

Article originally posted on Globe St. on September 11, 2026

Commercial real estate investors hoping that Treasury yields will eventually fall back to their pre-pandemic range may need to adjust their expectations.

Cohen & Steers believes the 10-year Treasury’s fair-value range is roughly 4.5% to 5%, according to Jeff Palma, the firm’s senior vice president and head of multi-asset solutions. If that view proves correct, it would signal a lasting shift in the interest-rate backdrop that supported property values and financing strategies for much of the 10- to 15-year period before the pandemic.

For real estate investors, the implications reach beyond day-to-day volatility in borrowing costs. A higher Treasury baseline can affect debt pricing, required returns, property values and the assumptions behind both acquisition and disposition strategies. It also means the market may be operating in a different rate regime rather than waiting for conditions to revert to the post-Global Financial Crisis norm.

Palma outlined the firm’s view in a CNBC interview, pointing to an economy that has remained more resilient than many expected and inflation that has been slow to retreat.

Resilient Growth Changes The Outlook

The core argument is that the economy has tolerated higher rates better than expected.

Growth has moderated, Palma said, but the economy’s underlying momentum still appears strong enough to withstand current borrowing costs. That resilience has stood out through a period marked by repeated geopolitical and economic disruptions.

“It certainly feels that way,” Palma told CNBC when asked whether elevated yields could persist for the next decade.

His comments suggest the neutral interest rate—the theoretical level at which monetary policy neither stimulates nor restrains economic activity—has moved structurally higher. If so, lower rates may not return to the levels investors became accustomed to in the years following the Global Financial Crisis.

That distinction matters for commercial real estate. Investors have spent the past several years recalibrating to higher rates, but many underwriting models still rest on the possibility of meaningfully lower financing costs ahead. A structurally higher neutral rate would make that expectation harder to support.

Inflation Limits Rate Relief

Persistent inflation is the other factor shaping Cohen & Steers’ view.

Palma said inflation has remained sticky even as growth has softened. That creates a difficult environment for central banks, which may have less room to cut rates substantially if inflation continues to resist a return to lower levels.

The firm’s 4.5% to 5% range for the 10-year Treasury is not a direct forecast of the neutral rate. Treasury yields also incorporate expectations for future economic growth, inflation and monetary policy. Still, Palma’s comments suggest that both the benchmark yield and the broader rate environment could remain above the levels that prevailed during much of the post-financial-crisis era.

For property owners and buyers, that means a lower-rate cycle alone may not be enough to restore the financing conditions that helped drive pricing during the previous decade. The rate outlook will depend not only on Federal Reserve policy, but also on whether inflation and economic growth continue to support higher long-term yields.

Real Assets Remain In Focus

The higher-rate outlook is also reshaping conversations about inflation protection.

Palma said inflation protection has become an increasingly important topic in Cohen & Steers’ discussions with clients globally. Interest in those strategies accelerated as the economy rebounded after the pandemic and has remained elevated as inflation has taken longer than expected to ease.

He identified natural-resource equities, commodities and global listed infrastructure as investments that can diversify traditional stock-and-bond allocations and may perform better in an inflationary environment. CNBC characterized Palma’s broader view as favoring real assets, including infrastructure and real estate.

That does not eliminate the challenges that higher rates create for property investors. But it reinforces a central point for the sector: real estate investment decisions may need to be built around a higher long-term cost of capital, rather than around the expectation that the rate environment of the last decade will soon return.

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