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Dr. Peter Linneman on Multifamily Cycles, Interest Rates, Cap Rates, Leverage, and AI Data Centers

On Multifamily AP360, Dr. Peter Linneman—founder of Linneman Associates and Wharton professor emeritus—discusses why real estate should be viewed as an 8–12-year ownership cycle requiring patience, not short-term performance judging. He explains how leverage can boost returns but can also wipe investors out in downturns and argues today’s 10-year Treasury near 5% is abnormal, driven largely by uncertainty and oil rather than broad inflation. Linneman challenges the common belief that interest rates directly drive cap rates, emphasizing instead that cap rates follow the flow of capital and credit availability. He says higher rates hit development first, while best assets hold up better. In multifamily, he attributes recent distress mainly to a COVID-driven supply surge plus tighter capital and warns data centers may eventually be overbuilt despite strong near-term AI demand.

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