On a positive note: “Many loans with longer maturities, say seven-to-10 years, may be maturing in an interest rate environment similar to that when the loan was originated. As always, the impact is property by property, market by market,” Rubin said.

“During the past decade of artificially low interest rates and abundant capital, the spread between interest rates and capitalization rates has been remarkably wide, leading many to predict that there will be enough room for interest rates to grow without impacting cap rates,” Rubin said. “However, during the last few months of volatility and uncertainty we have already seen a measurable pick up in cap rates in selected markets and property types. As interest rates find their new equilibrium so will cap rates; commercial real estate performance and valuation will always remain cyclical. But the impact will be highly differentiated by the varying demand for space in particular markets.”

Inflation leaves no area untouched

Rubin said inflation will have a direct impact on property construction and operating costs, as the market has already experienced since early this year. “Some higher costs have been driven by supply chain disruptions that have begun to moderate and will continue to seek equilibrium,” he added. “However, some expenses are likely to remain high for the foreseeable future. Wages and benefits, in particular, appear to have reached a new plateau given an incredibly robust job market and ubiquitous worker shortages.”

Utilities are also likely to remain high due to geopolitical forces and a more unpredictable and severe climate in many parts of the country, Rubin added. Additionally, he said climate change is also driving up the cost of property insurance.