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ower interest rates should benefit investors with commercial real estate assets in their portfolios, as it's expected to increase interest in alternative assets and make financing deals easier. However, the 50 basis point rate reduction may not be enough to solve all sector issues.

    Industry experts agree that a modest rate cut is a positive development, but it will take time for buyers and sellers to meet on price due to substantial past rate increases. The public real estate market has been pricing in anticipated rate cuts, with publicly traded REITs up 16% year-to-date.

    A persistent gap between public and private real estate markets has narrowed in recent years as interest rates normalized. Private real estate cap rates have increased by over 100 basis points since the third quarter of 2022, while REIT implied cap rates have remained relatively consistent.

    The rally in REIT prices has likely contributed to closing the gap further, although its extent won't be clear until the end of the third quarter. Lower debt costs should also stabilize the markets, making it easier for investors with expiring debt to refinance.

    Cohen & Steers anticipates that private real estate prices will reach a trough in the next quarter or two, helped by lower rates and sellers' acceptance of dropped valuations over the past two years. Lower interest rates are expected to speed up price discovery and shore up investor interest in the sector.

    However, some experts caution that rate cuts may not have a significant impact if coupled with rising unemployment and economic concerns. The Commercial Property Price Index remained flat in the second quarter, indicating no significant change in prices, while investment sales volume fell across all sectors.