The Federal Reserve's September rate hike, the first since 2023, has pushed the 10-year Treasury yield to levels last seen in 2007, creating a tougher financing environment for commercial real estate. For brokers and investors, deals that penciled out a year ago may no longer cover debt service, forcing a shift in underwriting practices. Dan Mosher, co-founder and CEO of DealGround, an AI-powered commercial real estate intelligence platform, says higher rates don't halt deals but make accurate property-level data essential.
“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. Even a half-point increase in interest rates can shrink the margin between rental income and debt costs, turning a viable deal into a losing one. “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,” he explained.
With less room for error, 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 so that people can really analyze those deals before they make offers,” he said. The same precision applies to existing debt: knowing how much debt is on a property and at what rate helps buyers and brokers assess whether a distressed situation exists.
Sellers also face a reality check. Many owners still expect last year's values, but Mosher notes it will take time for them to internalize that higher financing costs reduce what buyers can pay. “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,” he said. Brokers who can present real comparable data are better positioned to set prices that hold 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 added.
Despite the challenges, Mosher emphasizes that deals are still closing. “Deals are still getting done,” he said. The key for brokers is to tighten inputs—underwrite using actual rents and debt on the specific property, price listings for today’s financing environment, and avoid relying on market averages that may no longer reflect buyer capacity. Brokers interested in seeing how property-level rent, lease, and debt data can support this process can review DealGround’s how it works page. In a market where financing costs are at multi-decade highs, precision and property-level intelligence are becoming the difference between closing a deal and watching it stall.
