The combination of inflation and major geopolitical events, like the Russia-Ukraine conflict, has created a more volatile market environment for commercial real estate investment and higher interest rates. In the first quarter alone, the cost of fixed-rate debt is up 80 basis points, on average, and floating-rate debt is up 20 basis points, according to data from Chatham.

"While there was a moment of dramatic spot volatility as capital came flooding back to the U.S. Treasury market in a flight to safety, pushing yields into the low 1.7%'s, it seems as though the Treasury market may be pursuing its previous course of rising yields in response to indications of a rising Fed Funds rate," Jaran Burt, director of valuations at Chatham, tells GlobeSt.com. "The Fed has indicated its intention to combat inflation by raising interest rates, so while capital may get more expensive, there is no indication of a looming collapse of liquidity in the capital markets due to the conflict in Ukraine."

The higher cost of capital will certainly require investors to adjust underwriting standards, but for now, investors have not been deterred by the changing market conditions. "Investment committees and their investors are having to adjust expectations to a higher cost of capital on the debt side,", tells GlobeSt.com. [However], although underwriting has changed, transactions continue."