In the finance world, the 10 year treasury yield is often viewed as the barometer of economic health and an indicator of future interest rates. As it climbs, the effects are felt through the different sectors of the economy, including the commercial real estate market.
The 10-year treasury yield represents the interest rate at which the U.S. government borrows money for a ten-year period by selling treasury bonds. It is influenced by a myriad of economic factors, including inflation expectations, federal reserve policy, and overall market sentiment.
The recent uptick in the 10-year treasury yield has been driven by numerous factors including expectations of higher inflation, a potentially faster economic recovery, and changes in federal reserve policies.
One of the most immediate impacts on the commercial real estate markets is the increase in borrowing costs. As treasury yields rise, so do interest rates for commercial loans. With every 100 basis point increase in long-term interest rates results in a 60 basis point rise in commercial real estate cap rates. With the increased cost of borrowing, investors and builders see returns begin to drop, which inevitably pushes values down to compensate for lower returns. The added pressure of alternative investments becoming more attractive will add to the downward pressure of commercial real estate values.
Investors and developers in the commercial real estate sector should closely monitor the evolving economic landscape and adapt their strategies accordingly. As with any investments, a diversified approach, thorough due diligence, and a long-term perspective can help mitigate the effects of interest rate fluctuations.
Peter JamesPeter James is a First Vice President at Lyon Stahl Investment Real Estate and Co-Founder of The James Group, a leading Los Angeles–based investment brokerage team specializing in the sale of multifamily properties. Since beginning his career in 2007, Peter has built a strong reputation as a trusted advisor in the Los Angeles apartment market, with deep experience across the Westside and surrounding submarkets.
Peter advises investors on the acquisition and disposition of multifamily assets throughout Los Angeles County. His approach combines detailed financial analysis, real-time market insight, and a clear understanding of investor objectives, allowing him to guide clients through both straightforward and highly complex transactions.
In addition to traditional multifamily brokerage, Peter has extensive experience structuring and executing 1031 exchanges, including transitions into single-tenant NNN properties and Delaware Statutory Trust (DST) investments nationwide. His ability to navigate tax-deferred strategies and long-term portfolio planning has helped clients preserve capital, increase cash flow, and achieve greater flexibility across market cycles.
As Co-Founder of The James Group, Peter has helped build a collaborative, high-performing team known for integrity, disciplined execution, and market expertise. He maintains strong working relationships with lenders, attorneys, and qualified intermediaries, ensuring that each transaction is coordinated efficiently and aligned with his clients’ broader financial and investment goals.
Outside of real estate, Peter enjoys spending time outdoors with his wife, Jessica, and their daughters, Dylan and Daphne. Whether surfing, snowboarding, or exploring the California coast and mountains, family and an active lifestyle remain central to his life. Peter is a graduate of the University of California, Riverside.
