Why Everyone in Commercial Real Estate Watches the 10-Year Treasury
This summer I interned at Harbor Stone Advisors while studying finance and real estate at the Kelley School of Business at Indiana University. It’s been a great opportunity to take what I’ve learned in the classroom and apply it in the real world. I spent the summer learning about the full commercial real estate process and how a company like Harbor Stone Advisors operates, but a lot of the time was spent just talking about the macro economy and why everyone cares so much about the 10-year Treasury.
Before this summer, my understanding of interest rates and commercial real estate was pretty basic. I knew that as interest rates go up, it costs more to borrow money to buy a property. That makes it harder for buyers to afford what they want, so they end up offering less. That was really the extent of what I knew, and I didn’t fully understand why the 10-year Treasury specifically was such an important factor in this industry.
What I learned this summer is that the 10-year Treasury affects a lot more than just borrowing costs. It affects property values and the returns investors expect from a deal. One of the biggest lessons from my time at Harbor Stone is that commercial real estate doesn’t operate separately from the rest of the economy. The 10-year Treasury has a direct line to the cost of borrowing, the value of a property, and the return an investor expects on a deal.
So what actually is the 10-year Treasury?
It’s a long-term bond issued by the U.S. government. It’s considered one of the safest investments you can make because it’s backed by the full faith and credit of the government. That’s a big reason why it’s one of the first things investors look at when deciding where to put their money. Yields on most other investments, including commercial real estate, are measured against the yield on the 10-year Treasury.
The Treasury also moves borrowing costs across the whole commercial real estate market, not just what investors expect to earn. As the 10-year Treasury yield goes up, the cost of borrowing for real estate deals goes up right along with it. Lenders price their loans off of that benchmark, so when it moves, loan rates move too. Higher borrowing costs can impact property values because financing a deal gets more expensive, making it tougher for buyers to make the numbers work. On the flip side, when the 10-year Treasury yield drops, borrowing gets cheaper. That usually means more activity in the market, since deals are easier to pull off when financing doesn’t cost as much.
My Takeaways
At first, I couldn’t see how all of this connected. But the more I read and sat in on conversations at Harbor Stone, the more it started to click. If an investor can earn a decent, steady return with almost no risk by buying a 10-year Treasury bond, why would they put their money into something riskier unless they could expect to earn more? So before an investor accepts the extra risk that comes with commercial real estate, they want a higher return than what they’d get from the Treasury. That gap between the two is the reward for taking on more risk.
This also changed the way I look at a deal. Early on, I would have looked at the property itself, the location, the tenants, the condition, and figured that was most of the work. Now I know that’s only half the picture. Before you can really judge whether a deal makes sense, you have to know where rates are headed and what that means for financing costs and the return an investor needs to see. Skipping that part means missing a big piece of the puzzle about whether the numbers actually work.
My internship at Harbor Stone Advisors taught me that commercial real estate is about a lot more than buildings. The investment world is tied into the bigger economy, and if you want to understand this market, you have to understand the economic forces shaping it. I’d read about the 10-year Treasury before this summer, but I had no real sense of why it mattered so much in commercial real estate or why everyone in the industry pays such close attention to it.
I want to thank the whole Harbor Stone Advisors team for an amazing summer of learning and growth. I’m looking forward to finishing my degree at Indiana University and starting a career in commercial real estate, with this summer as a strong foundation for whatever comes next.
About the Author
Ryan Fowler is Harbor Stone Advisors’ 2026 summer intern, and is immersing himself in every aspect of the multifamily brokerage business. He is working closely alongside the deal team, and conducting in-depth research on ownership and local market performance.
He is a current student at Indiana University Kelley School of Business and will be entering his junior year this fall, working towards his BBA with a focus in finance and real estate. In his free time, he enjoys traveling, watching sports, and staying active.