CREW Special Report: Navigating a High-Rate Environment

Following the Fed’s 25-basis-point increase on Sept. 16, commercial real estate capital markets and investors are once again navigating higher rates and elevated inflation. While the increase was only 25 basis points, the move has revived memories of the 2022 rate-hike cycle.

Rebecca Rockey, head of quantitative insights and principal economist at Cushman & Wakefield, said she does not see the current situation as a repeat of four years ago. In her session, “The Global Commercial Real Estate Outlook Amidst Structurally Higher Uncertainty,” at the 2026 CREW Network Convention, Rockey said the “muscle memory of 2022” still sticks with the industry, but the current environment is very different.

During the 2022 rate-hike cycle, rates increased by around 500 basis points in less than 18 months. Today, she is not anticipating such an aggressive cycle and sees the current environment as more contained and digestible. Looking ahead, Rockey anticipates some yield-curve volatility, but said Cushman & Wakefield has not yet seen its business pull back in response to higher rates.

A different path to returns

During her session, Rockey pointed out that there is still competition to get deals done. “You have a tremendous amount of capital looking to invest,” she said.

After years of under-allocation, Rockey said commercial real estate remains an attractive asset class for investors, but ongoing competition for deals is creating other challenges for the industry.

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She explained that spreads are already tight and could compress even further. At the same time, Rockey believes investors can no longer rely on cap-rate compression for returns as they have in the past.

Instead, she said investors are more focused on income. This shift has broader implications for individual assets as investment decisions become even more property-specific. Rockey shared that the fastest-growing markets aren’t always the best opportunities for capital. Additionally, performance across properties can vary greatly within the same market.

Where will capital go?

Even though Rockey said there is still capital that investors are looking to deploy, the outlook across asset classes is uneven. In her address, she pointed to particularly promising fundamentals in industrial and retail.

In industrial, Rockey noted that demand is strengthening across the sector. “We know the supply side has come down, and rent growth is already warming,” she said, also noting that she anticipates that rent growth will “kick up.”

On the retail side, things are more selective than industrial, but overall retail is “structurally underbuilt.” She also mentioned that there is a gap between replacement costs and current values, which could create more opportunities for returns.

That broader optimism around retail also surfaced in a separate CREW session, where panelists discussed flexible leasing strategies and the repositioning of former anchor spaces.

Multifamily, however, may take longer to see stronger rent growth. Rockey said 2026 did not bring the rebound some expected and believes more “green shoots” will emerge in the second half of 2027.

The office sector showed some of the widest variation in Rockey’s data, reinforcing her point that performance is increasingly asset-specific. She said at least 30 percent of assets in each office class are fully leased, while the weakest 10 percent of Class A properties are about 83 percent vacant and the weakest 10 percent of Class B properties are roughly 75 percent vacant.

Even with that bifurcation, Rockey said the office market is “transitioning into an upswing.” In some markets, she said the top-performing segment is already tighter than it was before the pandemic.

“What we can be sure of is that the way our economy works is going to change radically,” Rockey said. “We are the built environment. We let the economy happen in the world around us, and so that to me means opportunity unlimited for every person in this room.”