Rising Treasury Yields Squeeze Commercial Real Estate Deals, but Precision Data Keeps Transactions Moving

Commercial real estate brokers in Texas and across the nation are navigating a tougher financing environment as the 10-year Treasury yield climbs to levels last seen in 2007, following the Federal Reserve's September rate hike. For brokers and investors, deals that penciled out a year ago may no longer cover debt service, forcing a shift toward more precise underwriting. Dan Mosher, co-founder and CEO of DealGround, an AI-powered commercial real estate intelligence platform, says higher rates don't halt deals but make accurate property-level data essential. "The 10-year Treasury and the 30-year Treasury have all gone up to levels not seen in the last 20 years. That is going to tighten the screws a little bit on new deals getting done," Mosher said.

Most commercial real estate investors evaluate a deal by whether a property's rent covers financing and still yields a return. When debt costs rise, that margin shrinks quickly. "If I'm going to finance something and I've got a certain rent stream that's coming from a property, if interest rates all of a sudden just went from five and a half percent to six percent, now all of a sudden the rental stream that I had may not be sufficient to generate return because I'm paying more interest on the debt," Mosher said. Half a point can determine whether a deal works, leaving brokers with little room for error in underwriting.

When rates were lower, a wider range of outcomes could still allow a deal to proceed. With thinner margins, an estimate off by a small amount can sink an offer after weeks of work. Mosher advocates underwriting from actual numbers on a specific property rather than broad averages. "What are the rents on a specific property? Not the aggregated rents, not the hearsay rents that someone's talking about, but the actual rents that appeared in the offering memorandum so that people can really analyze those deals before they make offers," he said. The same applies to existing debt: knowing how much debt is on a property and at what rate reveals whether a distressed situation may be looming.

One of the hardest conversations in a rising-rate market is with sellers. Many owners still have last year's values in mind, and Mosher says it will take time for expectations to adjust. "I think there is a little bit of time that it's going to take for the sellers to internalize that with interest rates going up, the value of their asset may be off from their expectations. That's just because it's going to take higher costs to finance that purchase for whatever buyer comes to the table," Mosher said. For listing brokers, a property priced on hope rather than current financing costs is likely to sit. Mosher says brokers who can show sellers real comparable data are better positioned to set a price that holds up. "The visibility of DealGround allows brokers to help sellers price their properties more closely to what it will trade for. Not what they hope they're going to get, but what they actually can get in this market," he said.

Mosher is clear that higher rates have not frozen the market. Buyers and lenders remain active, but deals now require more precision and sometimes a price adjustment to close. "Deals are still getting done," he said. For brokers, the practical takeaway is to tighten the inputs: underwrite from actual rents and actual debt on the specific property, price listings for today's financing environment, and avoid relying on market averages that may no longer reflect what a buyer can pay. Brokers who want to see how property-level rent, lease, and debt data fits into that process can review DealGround's how it works page. The implications extend beyond individual transactions: as financing costs stay elevated, the ability to access and analyze granular property data may determine which brokers and investors can keep deals moving, supporting liquidity and price discovery in Texas commercial real estate markets.