With Treasury Yields at a 19-Year High, How Do Commercial Real Estate Brokers Still Make Deals Pencil?

Rising interest rates have changed the math on commercial real estate deals. The Federal Reserve raised its benchmark rate in September for the first time since 2023, and the 10-year Treasury yield has climbed to levels last seen in 2007. For brokers and investors, a deal that looked solid a year ago may no longer cover its debt.

Dan Mosher, co-founder and CEO of DealGround, an AI-powered commercial real estate intelligence platform, says higher rates don’t stop deals from getting done, but they make accurate property-level data far more important than before.

“The 10-year Treasury and the 30-year Treasury have all gone up to levels not seen in the last 20 years. That is going to tighten the screws a little bit on new deals getting done,” Mosher said.

Most commercial real estate investors judge a deal by whether a property’s rent covers its financing and still leaves a return. When the cost of debt rises, that margin shrinks quickly.

“If I’m going to finance something and I’ve got a certain rent stream that’s coming from a property, if interest rates all of a sudden just went from five and a half percent to six percent, now all of a sudden the rental stream that I had may not be sufficient to generate return because I’m paying more interest on the debt,” Mosher said.

Half a point can be the difference between a deal that works and one that does not. That leaves brokers with less room for error in their underwriting.

When rates were lower, there could be a wider range of outcomes and a deal would still move forward. With thinner margins, an estimate that is off by a small amount can sink an offer after weeks of work.

Mosher says the answer is to underwrite from the actual numbers on a specific property rather than broad averages.

“What are the rents on a specific property? Not the aggregated rents, not the hearsay rents that someone’s talking about, but the actual rents that appeared in the offering memorandum so that people can really analyze those deals before they make offers,” Mosher said.

The same goes for existing debt. Knowing how much debt is already on a property, and at what rate, tells a buyer or broker what the owner is working with and whether or not there’s a distressed situation afoot. Brokers who already have a view on where rates are heading can combine it with a property’s actual cash flow and see quickly whether a deal can work.

One of the hardest conversations in a rising-rate market is with sellers. Many owners still have last year’s values in mind, and Mosher says it will take time for that expectation to adjust.

“I think there is a little bit of time that it’s going to take for the sellers to internalize that with interest rates going up, the value of their asset may be off from their expectations. That’s just because it’s going to take higher costs to finance that purchase for whatever buyer comes to the table,” Mosher said.

For listing brokers, a property priced on hope instead of on current financing costs is likely to sit. Mosher says brokers who can show sellers real comparable data are better positioned to set a price that holds up.

“The visibility of DealGround allows brokers to help sellers price their properties more closely to what it will trade for. Not what they hope they’re going to get, but what they actually can get in this market,” Mosher said.

Mosher is clear that higher rates have not frozen the market. Buyers and lenders are still active, but deals now require more precision, and sometimes a price adjustment, to close.

“Deals are still getting done,” Mosher said.

For brokers, the practical takeaway is to tighten the inputs. Underwrite from actual rents and actual debt on the specific property, price listings for today’s financing environment, and avoid relying on market averages that may no longer reflect what a buyer can pay. Brokers who want to see how property-level rent, lease, and debt data fits into that process can review DealGround’s how it works page.

About DealGround
DealGround is the AI-native intelligence command center built for how brokers actually work – turning property, tenant, ownership, and market data into faster, more informed deal decisions. To see it in action, request a demo at www.dealground.com.

This article is based on information provided by the expert source cited above. It is intended for general informational purposes only and does not constitute legal, financial, or real estate advice. Readers should conduct their own research and consult qualified professionals before making any real estate or financial decisions.

Disclosure: Individuals or companies mentioned may have a commercial relationship with KeyCrew.

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