Update—Will Real Estate Fail When Interest Rates Rise?

Recently (May 2022–January 2024), the yield on the 10-year Treasury rose +40%, and the yield on one-month commercial paper rose +520%. During this period, stocks did just fine, with the Top-100 up +26% and the S&P Industrials climbing +23%. The US economy also grew, with real GDP up +3.6%. Yet, S&P Utilities fell −13% and institutional-quality low-leverage core real estate declined by −17%. The original version of this article (based on May 2022 data) concluded that core institutional real estate was essentially immune to rising interest rates (or declining). But the data since May 2022 strongly suggest the opposite conclusion. This update provides a revised analysis, taking advantage of the data since May 2022 and fully incorporating the staggering interest rate increases since that date. [ABSTRACT FROM AUTHOR]