Chicago, Illinois, July 1, 2016 – The summer remains hot for the real estate debt and equity markets, despite some cooling on the coasts. Even as prices have peaked in some of the major primary markets, much of the country still on track with record sales and financing volumes. Low rates, lack of quality investment opportunities and overall strong cash flow performances keep investors in the game at a frenzied pace.

After the surprising results of Brexit plunged rates to record-low territory late last month, the Fed may abandon any efforts to raise rates and even lower rates.  Even as the British European Union issues subside, overall global malaise should continue to keep yields low with foreign investors flocking to US treasuries for safety.

Persistently low interest rates assure that capitalization rates will also remain low, translating to peak pricing with less attractive yields for buyers. However, some markets are starting to see pricing levels stabilize, as investors find minimal yield differences between various property sectors.  For instance in the case various types of “bed” properties, student housing, senior facilities and traditional multifamily assets trade at much tighter yield spreads than in the past. Any type of institutional quality investments, longer-term internal rate of return benchmarks are in the middle to higher single-digit range for core properties.

Will real estate investors flock to other more profitable investment categories?  More opportunistic investments are advertising yields in the lower to middle teens, also at historical lows, but not low enough to discourage investing.  In other words, real estate yield risks are still perceived to be lower in comparison to alternative stock market investments, since deals are backed by “real” assets.

Now more than ever, borrowers are ambivalent to fixed-versus-floating-rate debt. Overall mortgage rates dipped below 3% for shorter-term debt of five years or less; longer-term fixed-rate debt is priced in the higher 3% to lower 4% range. Due to a variety of factors relating to risk aversion and regulatory concerns, many lenders favor “safety versus yield philosophy,” offering lower rates as opposed to higher leverage beyond 65% loan-to-value.

Jeanne Peck of the Real Estate Capital Institute® suggests, “Lenders are accustomed to providing lower leveraged loans.”  She adds, ”Just the same, investors are becoming accustomed to keeping more cash in properties since there are fewer other yield opportunities and prices are so robust.”