Tightening interest rates will affect U.S. real estate by increasing borrowing costs. This coincides with slowdowns in a number of prime markets; commercial real estate volumes decreased by 11% in 2016, the first downturn since 2009. Investors in U.S. commercial property—in parallel with investors in other prime markets— are deterred by concerns over valuations and changes in tax treatment. Again in parallel with several prime markets, there has been a major infusion of new property developments beyond current buyer appetite.
CMBS lending has also declined this year, partly reflecting the risk-retention requirement of the Dodd-Frank Act. However, there remain many bright spots in this diverse sector. Industrial, biomedical, and logistics property have all had a real renaissance alongside secondary and in some countries tertiary urban centers. The secondary trading market in real estate funds also has been a buoyant growth area.