Rising interest rates are reshaping the commercial real estate landscape, forcing brokers and investors to reassess how they underwrite deals. The Federal Reserve's September rate hike, the first since 2023, and the 10-year Treasury yield's climb to levels last seen in 2007, have tightened the screws on new deals. According to Dan Mosher, co-founder and CEO of DealGround, an AI-powered commercial real estate intelligence platform, higher rates don't halt deals but make accurate property-level data more critical than ever.
Most commercial real estate investors evaluate a deal by whether a property's rent covers financing and still yields a return. When debt costs rise, that margin shrinks quickly. Mosher explains that a half-point increase in interest rates can be the difference between a viable deal and one that fails. "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," he said. This leaves brokers with less room for error in underwriting.
In a lower-rate environment, a wider range of outcomes could still allow a deal to proceed. With thinner margins, even small estimation errors can sink an offer after weeks of work. Mosher advocates underwriting from actual property-specific numbers 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," he said. The same precision applies to existing debt: knowing how much debt is on a property and at what rate informs buyers and brokers about the owner's situation and potential distress.
Helping sellers price properties realistically is another challenge. Many owners still cling to last year's values, and Mosher notes it will take time for expectations to adjust. "With interest rates going up, the value of their asset may be off from their expectations," he said. Listing 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.
Despite higher rates, deals are still getting done, but they require more precision and sometimes price adjustments. Mosher emphasizes that buyers and lenders remain active. For brokers, the practical takeaway is to tighten 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 interested in seeing how property-level rent, lease, and debt data fits into this process can review DealGround's how it works page.
