Secondary Markets: A New Haven for Value‑Seeking Investors
Hamilton Lane’s Co‑Head of Real Estate, Elizabeth Bell, spoke on October 6, 2026 about the rising U. S. mortgage rates exceeding 7% for the first time in several years. The discussion focused on how this shift could reshape the broader real estate market, which has struggled to regain momentum after the pandemic. Bell explains that higher borrowing costs may prompt investors to look beyond primary markets to find attractive returns.
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Is the Post‑Pandemic Recovery Still on Track?
Bell addresses concerns that the real estate sector may be written off after a sluggish rebound. She argues that the current rate environment is a catalyst for a more balanced market. „When borrowing costs rise, the supply of new projects slows, tightening inventory and supporting prices,” she explains. She also points out that consumer spending patterns have shifted, with more people seeking stable, income‑generating assets rather than speculative growth. According to her, this shift could sustain demand for secondary market properties, especially in urban centers where rental yields remain high.
How Will Rising Rates Affect Investor Behaviour?
Higher mortgage rates will likely push investors toward assets with lower debt sensitivity. Bell predicts that institutional players will increase allocations to secondary market funds that focus on multi‑family and office properties with long‑term leases. She emphasizes that these assets offer portfolio diversification and lower volatility compared to primary development projects. „Investors are looking for predictable cash flows,” Bell says, noting that secondary markets provide a more stable income stream amid economic uncertainty.
The conversation suggests that the next wave of real estate investment will favor established, income‑producing assets over new construction. Bell warns that if rates continue to climb, the gap between primary and secondary market valuations could widen further, creating more opportunities for savvy investors. However, she cautions that macroeconomic factors such as inflation and employment rates will also play a role in shaping long‑term outcomes.
What Does This Mean for the Future of Real Estate Investing?
Q1: Why are mortgage rates above 7% significant for real estate? A1: Higher rates increase borrowing costs, reducing the appeal of new development projects and encouraging investors to seek existing properties that offer stable cash flows.
Frequently Asked Questions
Q2: What types of secondary market properties are most attractive right now? A2: Multi‑family residential and office buildings with long‑term leases are favored, as they provide predictable income and lower risk compared to speculative development projects.
Q3: How can investors capitalize on this market shift? A3: By allocating capital to secondary market funds or direct acquisitions that focus on income‑generating assets, investors can benefit from lower purchase prices and steady rental income amid rising rates.