“Increases in interest rates combined with modest inflation will favor assets with vacancy or short term rollover, rather than long-term, flat leases,” Reder says. “Moreover, despite the fact that LIBOR will likely continue to increase, debt will remain relatively attractive as spreads continue to contract.”

As Reder sees it, ample capital exists for both debt and equity investment, with an increasing amount of alternative capital transitioning to debt due to cycle and valuation concerns. However, he offers an “however.”

“The increased volume and competition in the debt space will likely provide an abundance of attractive financing which will serve as an additional tailwind for valuations,” Reder says. “Large institutional investors will rebalance their portfolios following a significant run up in equities. Real estate will remain an attractive opportunity, particularly compared to bonds, for asset reallocation providing additional capital to the real estate sector.”

(Find out why we may see more multifamily portfolio sales in 2018. And a multifamily asset in one of the highest Google search zip codes just traded hands. Get all the details.