What the Iran War Means for Commercial Real Estate
With everything happening right now, a common question is how the Iran war is impacting commercial real estate, and where that impact actually shows up.
For CRE, it shows up in the cost of capital. Inflation expectations shift, rates adjust, and suddenly deals that worked a few weeks ago don’t look the same.
How the Iran War Is Impacting Commercial Real Estate
The transmission is pretty straightforward: energy volatility feeds into inflation, which impacts rates, which ultimately drives the cost of debt.
We’re already seeing that play out. The 10-year Treasury has moved back into the mid-4% range, up roughly 50-60 basis points in recent weeks, pushing borrowing costs higher across the board.
For commercial real estate, that shows up quickly:
- wider spreads
- lower leverage
- tighter underwriting
The asset itself hasn’t changed, but the capital stack around it has.
Where This Shows Up First
The impact of the Iran war on commercial real estate doesn’t stop transactions, but it creates friction.
Refinancing becomes less predictable, loan proceeds tighten, and execution risk increases. That’s especially relevant with hundreds of billions in CRE loans maturing over the next 12–24 months, much of it underwritten at significantly lower rates.
If this environment persists, that’s where pressure builds and where dislocation typically begins.
Multifamily Still Has a Bid
At the same time, activity hasn’t disappeared.
There’s still capital looking to deploy, competitive bidding on well-positioned deals, and a clear preference for in-place cash flow.
But the shift is in how deals are evaluated.
This is no longer a growth-driven market, it’s a durability-driven one.
What We’re Seeing in California
Locally, the data reflects that shift.
In a recent CoStar report, San Diego apartment rents showed only marginal gains in March, with first-quarter rent growth coming in softer than expected.
More broadly:
- rent growth has flattened
- asking rents are barely moving
- and supply continues to limit upside
It’s not a downturn, it’s compression. So, in higher-cost markets like California, that matters more. When rent growth stalls and debt gets more expensive, basis and structure start to drive outcomes.
The Bottom Line
The real variable now is time.
If this is short-lived, markets stabilize and capital adjusts. If it drags on, inflation stays elevated, rate cuts get pushed out, and refinancing pressure builds.
The Iran war isn’t stopping commercial real estate, but it is changing behavior.
Capital is still there. It’s just more selective and more sensitive to structure than growth.
If you’re thinking about a REFI or how this environment might impact your deals, I’m always happy to talk through what we’re seeing on the lending side.