In the wake of the financial crisis, in order to stimulate consumption and investment and to facilitate deleveraging, the world’s key central banks have undertaken aggressive quantitative easing programs. Since 2008, global monetary stimulus has produced interest rates that are close to zero. Positive inflation since mid-2009 has meant real interest rates have been negative for the first time since the 1970s.

Low interest rates have boosted the value of real estate assets in the Western world while generating only moderate economic growth. Prime real estate assets have been in great demand by investors looking for yield and a hedge against inflation. As confidence returns, capital is starting to flow into secondary real estate markets as well.

History suggests that both interest rates and cap rates are mean-reverting. So, if history repeats itself, interest rates have nowhere to go but up. The U.S. long-term Treasury bond rate is expected to reach its