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1Repair Windows errors before they cause bigger problems2Scan for outdated or missing drivers - takes under a minute3Clear out junk files and repair common Windows errorsHines Global Chief Investment Officer David Steinbach’s central point is that a small near-term rate cut is not enough to determine whether a commercial real estate investment works. Investors and developers must underwrite the longer-term cost of capital, inflation, property income and local supply. That is Hines’ investment perspective—not a prediction that every property or market will benefit.
What does rising interest rates mean for commercial real estate?
Higher borrowing costs can weigh on property values and make new construction harder to finance. They can also slow development, potentially limiting future supply. Whether that becomes an advantage for existing properties depends on local demand, rent growth, asset quality and the price paid; constrained construction alone does not guarantee higher returns.
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Hines announced on May 9, 2025, that Steinbach spoke with Bloomberg News’ Romaine Bostick and Carol Massar at the Milken Global Conference. The company’s summary says they discussed trade policy and its possible effects on inflation and interest rates, emerging investment corridors, living-sector demand, investor sentiment—including interest in Europe—and creating alpha at the property and portfolio level amid higher rates and inflation. Hines’ announcement identifies those themes, but does not provide an accessible transcript of that exact conversation.
How do higher rates affect property values and development?
Underwrite the investment horizon, not just the next rate decision
In a separate interview transcript reproduced on Hines’ LinkedIn page, Steinbach argues that real estate projects should be assessed against longer-term rate and inflation expectations because they are held and underwritten over years. He contrasts a hypothetical 25-basis-point rate cut with the earlier 500-basis-point increase, calling the small cut less important than expectations for the longer tail of rates. Those figures and that reasoning are his remarks in the reproduced transcript; they should not be attributed as verbatim statements from the May 2025 Milken interview.
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Development feasibility can shape future supply
Steinbach says development becomes difficult when the return from building is not sufficiently attractive relative to buying an existing property. In the LinkedIn transcript, he says a roughly 200-basis-point spread between build-to and buy-to returns is common. This is his description, not an independently verified market-wide benchmark. If higher costs keep projects from penciling, less new supply may arrive; an existing property could then benefit if demand and rents grow. That is a conditional investment thesis, not a guaranteed outcome.
Does a rate cut make real estate a better investment?
Not by itself. A lower policy rate may change financing conditions, but investors still need to compare a property’s expected income with its purchase price and financing cost over the investment period. Hines’ 2026 outlook says U.S. lending yields remained above cap rates in most asset classes, limiting accretive leverage. In plain terms, when the borrowing cost exceeds the property’s income yield, debt can reduce rather than enhance returns unless income growth closes the gap. Hines says investors expect income growth to narrow that difference in some sectors over time; its outlook does not establish that leverage is attractive across all properties or regions.
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Which real estate sectors does Hines favor?
Hines’ public views have evolved across dated outlooks, and they are selective rather than a blanket call to buy real estate. The company’s 2025 mid-year outlook described living as a near-term conviction, while identifying retail and U.S. office credit as areas of focus, industrial as interesting selectively, office equity as an area to monitor, and data-center strategy as centered on powered-land aggregation.
In its 2026 Global Investment Outlook, Hines described recovery as measured and uneven. It said living remained a strong theme, interest in office equity was growing, industrial demand corridors were evolving, and powered land was relevant to data-center growth. It also highlighted U.S. office-credit dislocation as a possible source of opportunities across the capital stack. These are Hines’ judgments, with outcomes varying by market and asset—not universal sector recommendations.
What the outlook’s figures do—and do not—show
- Renting: Hines Research said about 80% of households in the developed economies it studied showed momentum toward renting rather than buying. The analysis used country-level sources and data generally covering 2010–2023, with country-specific periods; Hines notes assumptions for missing later homeownership observations in three countries. It is an estimate about the economies studied, not a measure of every household or a forecast for every rental market.
- Retail returns: NCREIF and Hines Research reported 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 describes a defined historical period, not future performance.
- Data-center land: Hines Research estimated that 40,000 acres of powered land—nearly 2 billion square feet—would be needed to meet current projections for data-center growth over the next five years. This is an estimate tied to those projections, not a count of completed development.
- Developed Asia: Hines Research expected prices and rents to grow by roughly 3% annually over the next five years. This is a forecast for developed Asia, not a realized result or a global estimate.
How should investors compare markets and properties?
Steinbach’s comments and Hines’ outlooks point to a set of practical distinctions—not a single timing signal. In the LinkedIn transcript, Steinbach says some markets were already seeing multifamily rent growth and demand for high-quality office with limited new supply, while others might take longer. Treat that as his forecast in that conversation, not a settled description of every market today.
- Geography and local supply: Check whether construction has been constrained and whether demand is strong enough to absorb available space. National or global sector trends can conceal substantial local differences.
- Property type and asset quality: A broad office or industrial label does not reveal whether a specific building has competitive features, tenants and leasing prospects. Steinbach’s remarks emphasize high-quality office in supply-constrained markets, not office properties indiscriminately.
- Income growth versus financing cost: Compare expected property income and its growth potential with both the purchase price and borrowing cost. Do not assume debt adds value when lending yields exceed cap rates.
- Build or buy: For development, test whether expected returns justify construction and financing costs. For acquisitions, assess whether buying an existing asset offers a stronger risk-adjusted case than building—and whether future supply constraints could plausibly support rents.
- Investment duration: Match assumptions about rates, inflation and rents to the years the capital will be committed. A near-term policy change is only one input to a long-duration investment.
How to read Hines’ outlooks
Hines’ outlook pages present the company’s investment judgments and forecasts, not independent investment advice. Hines says its outlook material is for informational purposes, is not investment advice or a recommendation, and is not an offer to invest in an asset or product. Its 2026 outlook also describes regional differences in recovery and transaction activity, so its sector views should be read in their stated geographic and time context.
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