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Rising interest rates can pressure REIT and real estate stock prices by raising valuation discount rates, making dividend yields less competitive with bonds, and increasing borrowing or refinancing costs. But higher rates do not automatically mean weaker REIT returns: when rates rise alongside stronger economic activity, better occupancy and rent growth can support property income. The outcome depends on why rates are rising, the REIT’s financing and maturity schedule, and the health of its property operations.
How do rising interest rates affect REITs?
“Interest rates” are not a single measure. REIT share prices can respond to expectations about both short-term policy rates and longer-term market yields. The federal funds rate and 10-year Treasury yield may move differently; long-term yields also reflect market forces beyond Federal Reserve policy. The Federal Reserve discusses the forces behind longer-term Treasury yields in its analysis of longer-term real interest rates.
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For a property-owning REIT, higher rates can affect the stock through three main channels: valuation, financing costs, and property operations. The first two can be headwinds, while stronger economic conditions may support the third.
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Valuations and alternatives to REIT dividends
Investors value a company partly by estimating the present value of its future cash flows. When market discount rates rise, that present value falls, all else equal. Higher yields on lower-risk fixed-income investments can also make a REIT’s dividend less attractive at a given share price, putting pressure on its valuation.
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This repricing can happen before a REIT’s rent collections or interest payments change. A falling share price in response to higher market yields does not, by itself, establish that the property business has weakened.
Borrowing costs and refinancing
Higher rates affect interest expense differently depending on the REIT’s debt. Fixed-rate borrowing generally does not reprice immediately, while floating-rate debt can expose a company to changes in rates sooner. A REIT with substantial debt maturing in the near term may also face higher costs if it must refinance or raise new capital.
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Review the company’s own filings for fixed- versus floating-rate debt, maturity dates, leverage, and interest coverage. Industry averages offer context, not a substitute for issuer-specific figures.
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Rates may rise during an economic expansion. If stronger demand helps a REIT maintain occupancy, raise rents, and grow net operating income (NOI) and funds from operations (FFO), those operating gains may counter some valuation or financing pressure. That offset is not guaranteed: the economic backdrop can differ from one rate cycle to another, and property sectors face different leasing conditions and demand.
What historical REIT returns show—and what they do not
Nareit reports that REIT total returns were positive in 78.0% of periods when long-term Treasury yields were rising, from Q1 1992 through Q4 2024. The comparable frequency for periods with falling yields was 78.1%. These are historical frequencies, not evidence that rising yields cause REIT gains or a prediction of what will happen in the next rate cycle. Nareit’s historical analysis also emphasizes the importance of the operating environment.
As Nareit commentary author Edward F. Pierzak wrote on July 15, 2026, “Elevated or rising interest rates, however, do not necessarily equate to weak, or poor, real estate performance.” That is a caution against treating rates as the only driver, not a rule that REITs will perform well whenever yields rise.
What industry debt figures can tell you
Nareit’s Q2 2026 industry snapshot reported debt-to-market assets of about 34%, approximately 90% fixed-rate debt, an average debt maturity just under six years, and a weighted average interest rate of 2%. Those are industry-level metrics, not the financing profile of every REIT. A company’s exposure can differ materially because of its debt mix, maturity calendar, leverage, and need for new capital. See Nareit’s REIT industry financial snapshot for the reported measures.
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Equity REITs and mortgage REITs face different rate risks
Equity REITs own or operate properties. To assess their sensitivity to rates, examine property-sector demand, leasing, occupancy, rent growth, asset values, NOI and FFO, as well as corporate debt and refinancing needs.
Mortgage REITs invest in or finance mortgage-related assets, so their risks also involve mortgage security prices, asset duration, borrower prepayments, mortgage demand, financing, and hedging. When rates rise, mortgage assets can lose value; if borrowers refinance less often, asset duration may extend. The effects depend on the company’s portfolio and hedges, so mortgage REITs should not be treated as interchangeable with property-owning REITs.
Angel Oak Mortgage REIT’s SEC-filed 2025 annual report, for example, describes risks associated with interest rates, inflation, borrowing costs, and economic volatility. It is a company-specific disclosure, not a complete description of every mortgage REIT’s exposure: Angel Oak Mortgage REIT’s 2025 annual report.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How to assess a REIT when rates are rising
Use the company’s filings and operating updates to assess its own exposure rather than drawing conclusions from an industry average or a single interest-rate move.
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Clear out junk files and repair common Windows errorsFree Scan →Fix the driver behind crashes, sound loss and screen glitchesFind Drivers →Repair Windows errors before they cause bigger problemsFix Now →- Identify the REIT type. Determine whether it is an equity REIT focused on property operations or a mortgage REIT with mortgage-asset, duration, prepayment, and hedging exposure.
- Check its debt structure. Compare fixed- and floating-rate borrowing, leverage, and interest coverage.
- Review the maturity schedule. Look for near-term maturities and consider whether the company may need to refinance or raise capital at higher rates.
- Evaluate property fundamentals. Examine sector-specific demand, occupancy, rent growth, and the direction of NOI and FFO.
- For mortgage REITs, examine portfolio and hedging disclosures. Assess the company’s discussion of mortgage asset values, duration, prepayments, financing, and hedges rather than assuming the same rate exposure across issuers.
The Intelligent REIT Investor: How to Build Wealth with Real Estate Investment Trusts, by Stephanie Krewson-Kelly and R. Brad Thomas, is supplementary background on REIT investing; Wiley lists its first publication date as August 24, 2016. It is not a current source for market data. Wiley’s book catalog listing.
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