Interest rates have a way of exposing whether an investment strategy was built on solid footing or soft sand. Today’s environment is no different. With borrowing costs elevated and liquidity tightening, many Commercial Real Estate Finance strategies that worked five years ago simply don’t translate anymore. As someone who has navigated several market cycles — from development deals to experiential retail expansions like Topgolf — I, Randall Starr, CRE Finance Executive & Topgolf Former CDO see this moment not as a period of constraint, but as a period of clarity. These conditions force REIT investors to think with discipline, sharpen their underwriting, and pursue opportunities the market is temporarily too distracted to notice.
In this article, I outline three practical strategies I believe every REIT investor should consider right now:
- Strengthen your capital structure before chasing growth.
- Shift toward asset classes where demand is durable, not speculative.
- Underwrite experiences, not just square footage — especially in sectors tied to the Experience Economy.
These strategies aren’t theoretical. They come from lived experience — including years spent scaling Topgolf into new markets where site selection, financing, and development had to be airtight. High rates didn’t stop us then; clear strategy kept us moving. The same applies to REIT investing today.
Table of Contents
1. Build a Capital Structure that Can Withstand Rate Pressure
A disciplined balance sheet is a competitive advantage
In a high-interest-rate climate, the first instinct for many REITs is to pull back. The smarter move is to tighten the foundation instead of freezing strategy altogether. Strong capital structures win in environments where others overextended themselves.
Even well-run REITs are feeling the pressure of refinancing risk. The market is rewarding those who keep debt maturities staggered, maintain ample liquidity, and secure fixed-rate debt where possible. Investors may find that the REITs performing best today are not the ones chasing aggressive growth, but the ones showing disciplined cash-flow management.
Why this matters right now
Rising borrowing costs have reshaped how equity and debt interact. Traditional spreads are thinner, which means missteps are more expensive. A REIT with a balanced structure can still pursue acquisitions and development, even when the environment is noisy.
When we were scaling Topgolf, this principle was non-negotiable. We were building in multiple markets at once, each with its own zoning, infrastructure, and capital demands. One quarter, we faced a sudden financing delay in a key market. Instead of halting our plans, our disciplined structure allowed us to shift capital from another project and keep the pipeline intact. That kind of flexibility isn’t luck — it comes from designing balance sheets that can absorb pressure without losing momentum.
Where investors should focus
- Fixed-rate debt over short-term floating exposure
- Healthy liquidity reserves to manage unexpected delays
- Moderate leverage levels that allow room for acquisitions during soft pricing cycles
In today’s climate, good capital discipline is not defensive — it’s strategic.
2. Prioritize Asset Classes with Real, Durable Demand
Demand resilience matters more than yield spread
Interest rates have shifted the focus back to fundamentals. REIT investors should prioritize sectors where demand isn’t tied to speculative growth but tied to everyday necessity or reliable lifestyle behavior.
Asset classes that continue to show resilience:
- Industrial logistics
- Data infrastructure
- Necessity-driven retail
- Experiential retail that connects with consistent consumer spending patterns
Commercial Real Estate Finance rewards staying close to the core
There’s a temptation to chase “the next big thing.” But high-rate periods expose the weakness of untested ideas. Investors studying Commercial Real Estate Finance today can see a clear pattern: REITs anchored in essential or experience-driven sectors outperform because their cash flows hold steady even when capital markets feel shaky.
A note on experiential retail
This is where my background in scaling Topgolf informs my view. The Experience Economy has evolved from being considered “niche entertainment” to a stable, predictable engine for foot traffic and cash flow. When a concept connects — whether golf, dining, fitness, or gaming — the demand profile behaves more like lifestyle infrastructure than discretionary retail.
The key is understanding which experiential models have staying power. Look for:
- Repeat visitation
- Strong labor-to-revenue ratios
- Sites supported by favorable trade area demographics
- Concepts that convert social activity into predictable revenue
High rates don’t diminish demand for experiences; they simply reward the operators who run them efficiently.
3. Underwrite Experiences, Not Just Real Estate
Square footage doesn’t tell the full story anymore
In a traditional underwriting model, you evaluate rent, operations, and location. In today’s market — especially in experiential categories — that’s not enough.
Investors should evaluate:
- How well the operator activates the space
- Whether the offering creates community stickiness
- The strength of brand loyalty and frequency of use
- How well technology, programming, and service drive margins
This mindset was at the core of Topgolf’s expansion strategy. We didn’t just build venues; we built local hubs that blended entertainment, dining, and sport. In markets where the land cost was tight or the infrastructure was complicated, the experiential model often justified the investment because the revenue profile was stronger and more diversified than traditional retail.
Why this matters for REITs today?
REITs that understand operating models — not just real estate — are better positioned to identify assets that can outperform in a high-rate world.
There is a growing segment of experiential operators who run high-margin businesses but don’t own their real estate. This creates a window of opportunity for REITs:
- Long-term leases
- Strong tenant performance
- Attractive rent coverage ratios
- Higher tenant retention
The REITs that will win in the next cycle are the ones that know how to underwrite the experience layer, not just the structure itself.
Conclusion
High interest rates reveal which strategies were built for long-term performance. For REIT investors, this is the time to stay disciplined, stay selective, and stay focused on demand-driven sectors. A strong capital structure, a commitment to resilient asset classes, and a deeper understanding of the Experience Economy can keep portfolios moving even when the market feels tight.
If there’s one takeaway I’ll leave you with, it’s this: Markets shift, but fundamentals don’t. The investors who stay grounded in real demand and run disciplined strategies will find opportunities where others see obstacles. As the landscape continues to shift, I’m confident the next cycle will reward those ready to move with clarity and conviction.
