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Higher interest rates do not make every commercial property a bad investment—or make a rate cut an automatic buying signal. Hines Global Chief Investment Officer David Steinbach’s view is to underwrite for the longer-term cost of money, then judge each market and property by its supply, demand, income prospects, and development economics. His comments are Hines’ investment perspective, not a recommendation for every investor.
What does rising interest rates mean for commercial real estate?
Higher rates can affect a property in two connected ways: they raise the cost of financing, and they influence the return investors require to own an asset. That can make acquisitions and development harder to justify. But rates are only one part of the investment case; expected rent and income growth, local demand, asset quality, and the amount of competing supply also matter.
In a transcript reproduced on Hines’ LinkedIn page, Steinbach argued that a real-estate project should be evaluated against expectations for rates and inflation over its investment life. “The bigger thing to look at for me is the longer tail of interest rate expectations and where we think inflation interest rates will be in 5 or 10 years, because when you do a real estate project, you underwrite for that duration.” The five- to ten-year horizon is his framing of the issue, not a universal holding period.
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Repair Windows errors before they cause bigger problemsFix Now →Scan for outdated or missing drivers - takes under a minuteDriver Scan →Clear out junk files and repair common Windows errorsFree Scan →In that same transcript, he characterized a hypothetical 25-basis-point rate cut as small beside the earlier 500-basis-point rate increase. His point was that a modest near-term policy move would not by itself settle the long-term financing and inflation assumptions behind a property investment. Those figures and that comparison are Steinbach’s interview remarks, not a forecast of a particular future rate decision.
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How do higher rates affect property values and development?
Financing costs can constrain development
Steinbach described the spread between the return from building and the return from buying an existing property as an important development hurdle. He said a roughly 200-basis-point build-to/buy-to spread is common; that is his characterization in the LinkedIn-reproduced interview transcript, not an independently established market-wide benchmark. When the spread is absent, he said, development can be difficult to make pencil.
If fewer projects proceed, future supply may be more limited. Steinbach’s argument is that existing properties could benefit if demand and rents grow while construction has lagged. That outcome depends on the market and the property: constrained supply alone does not guarantee rising rents, value appreciation, or attractive returns.
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Income yield and borrowing cost are not the same measure
Hines’ 2026 Global Investment Outlook says U.S. lending yields remained above cap rates in most asset classes, limiting accretive leverage. A property’s cap rate is its net operating income relative to its value; a lending yield reflects the cost of borrowing. When borrowing costs exceed the property’s income yield, debt may reduce rather than increase the return on invested equity. Hines says investors expect income growth in some sectors to close that gap over time, but that is not a claim that leverage is attractive across all assets or regions.
Does a rate cut make real estate a better investment?
Not on its own. A rate cut may change financing assumptions, but Steinbach’s longer-horizon argument is that investors also need to assess the rates and inflation they expect over the period they will own or develop a property. A sound decision still turns on whether prospective property income, market demand, acquisition price, and financing costs work together.
Timing also varies by location. Steinbach said some markets were already showing multifamily rent growth and demand for high-quality office with limited new supply, while other markets could take longer. Those are his market observations and expectations in the transcript, not a blanket forecast for multifamily or office everywhere.
Which real estate sectors does Hines favor?
Hines’ public outlooks describe a selective, dated investment perspective—not a simple call to buy real estate broadly. The themes have evolved between the company’s 2025 mid-year outlook and its 2026 outlook:
| Outlook | Hines’ stated areas of focus | What the emphasis means |
|---|---|---|
| 2025 mid-year | Living was its near-term conviction; retail and U.S. office credit were areas of focus; industrial was interesting selectively; office equity was being monitored; data-center strategy centered on powered-land aggregation. | Hines was distinguishing between subsectors and investment approaches rather than treating a property type as uniformly attractive. |
| 2026 Global Investment Outlook | Living remained a strong theme; interest in office equity was growing; industrial demand corridors were evolving; U.S. office credit dislocation presented opportunities across the capital stack; powered land was highlighted in connection with data-center growth. | Hines described a measured, uneven recovery with regional differences, not a universal recovery across sectors or markets. |
These are Hines’ judgments at the dates of the respective outlooks. For example, its 2026 outlook estimates that 40,000 acres of powered land—nearly 2 billion square feet—will be needed to meet current data-center growth projections over the next five years. That is a Hines Research estimate tied to projections, not a count of completed development.
What other figures does Hines cite—and how should they be read?
- Renting and homeownership: Hines Research’s 2026 outlook says about 80% of households in the developed economies it studied showed momentum toward renting rather than buying. The analysis uses country-level sources and generally covers 2010–2023, with country-specific periods; Hines notes assumptions where later homeownership observations were missing in three countries. This is Hines’ analysis, not a uniform measure of every developed economy or a guarantee of future rental demand.
- U.S. retail returns: Hines Research, citing NCREIF data, reports that U.S. retail ranked first in total returns among the four major NCREIF property types in each of the 11 quarters through Q3 2025. This is a backward-looking comparison for a specified set of quarters, not a prediction that retail will lead going forward.
- Developed Asia: Hines Research’s 2026 outlook expects prices and rents in developed Asia to grow roughly 3% annually over the next five years. This is a regional forecast by Hines, not a measured result or a projection for all of Asia.
What was the Bloomberg interview about?
Hines’ May 9, 2025 announcement says Steinbach spoke with Bloomberg News’ Romaine Bostick and Carol Massar at the Milken Global Conference. Hines summarized the conversation as covering trade policy’s possible effects on inflation and interest rates, emerging investment corridors, living-sector tailwinds, capital flows including investor interest in Europe, and creating alpha at both property and portfolio level amid higher-for-longer rates and inflation. Read Hines’ May 9, 2025 announcement.
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The detailed rate, development-spread, and market comments above come from a separate Bloomberg conversation transcript reproduced on Hines’ LinkedIn page. The available Hines announcement does not establish that this transcript is the exact Milken interview, so those remarks should not be attributed to that specific May 2025 appearance. View the transcript reproduced by Hines on LinkedIn.
Hines’ 2025 mid-year outlook and 2026 outlook provide later context for how the company described sector opportunities: 2025 mid-year outlook and 2026 Global Investment Outlook. Hines says its outlook content is informational, is not investment advice or a recommendation, and is not an offer to invest in an asset or product.
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