Industrial REITs Navigate High-Interest-Rate Challenges: Capital Structure Optimization and Yield Sustainability

The industrial real estate investment trust (REIT) sector has faced a turbulent 2024, with a 17.8% negative return driven by oversupply and shifting e-commerce dynamics. Yet, as 2025 unfolds, a clearer path to stabilization is emerging. With new construction slowing and demand fundamentals remaining robust, industrial REITs are recalibrating their capital structures to navigate a high-interest-rate environment. This article examines how these REITs are optimizing debt financing strategies to preserve yield sustainability and what investors should watch for in this evolving landscape.

Capital Structure Optimization: Extending Maturities and Diversifying Sources

The 2025 industrial REIT capital structure is defined by a strategic shift toward long-term debt and alternative financing. With 30-year mortgage rates averaging 6.5–7.5% in 2024 and the 10-year Treasury yield hovering near 3.5–4.0%, REITs are prioritizing fixed-rate, long-dated obligations to lock in costs and reduce refinancing risk. For example, Healthpeak Properties executed a $500 million 5.375% senior note offering in July 2025, maturing in 2035. This refinancing extended its debt maturity profile, replaced higher-cost short-term debt, and aligned liabilities with the long-term nature of its real estate assets.

Such moves are not isolated. Industrial REITs are increasingly tapping into private credit markets, where insurance capital and specialty lenders offer tailored, long-term debt solutions. These non-traditional lenders provide fixed-rate financing with terms that better match the 10–20 year lease durations typical of industrial assets. By diversifying their capital sources, REITs mitigate reliance on volatile public debt markets and reduce exposure to rate hikes.

Yield Sustainability: Balancing Cost of Capital and Growth

Maintaining yield sustainability in a high-rate environment requires a delicate balance between cost control and growth. Industrial REITs with strong liquidity positions, such as Healthpeak's $2.3 billion in July 2025, are better positioned to weather short-term volatility. These REITs are also leveraging their operational expertise to drive returns through asset management and redevelopment. For instance, Healthpeak's Atlanta development projects—pre-leased at 78% occupancy—project mid-7% cash returns upon stabilization, enhancing long-term cash flow visibility.

The sector's focus on non-coastal markets further supports yield resilience. REITs like STAG Industrial (STAG) and LXP Industrial Trust (LXP) are capitalizing on Sunbelt and Midwest markets, where lower land costs and population in-migration drive demand. These regions are also benefiting from onshoring and nearshoring trends, which are expected to boost industrial activity in secondary markets.

Strategic Debt Management: Lessons from the Field

Healthpeak's approach to capital structure optimization underscores a broader trend: extending debt maturities to hedge against rate volatility. While its 5.375% coupon is higher than the 4.0% notes it repaid earlier in 2025, the 10-year term provides stability. This trade-off between cost and duration is critical for REITs with long-term asset holdings.

Moreover, industrial REITs are prioritizing liquidity preservation. In Q2 2025, U.S. REITs raised $22.5 billion in capital, with $16.3 billion from debt offerings. This access to public markets gives them a competitive edge over private market peers, enabling them to pursue acquisitions or development projects when opportunities arise.

Investment Implications and Key Metrics to Watch

For investors, the key to identifying resilient industrial REITs lies in analyzing their capital structure flexibility and yield sustainability. Metrics such as net debt-to-EBITDAre, liquidity reserves, and debt maturity profiles are critical. REITs with net debt-to-EBITDAre ratios below 7x and liquidity exceeding $1 billion are better positioned to navigate rate hikes.

Additionally, watch for REITs with exposure to high-growth sectors like logistics and e-commerce. These assets are less sensitive to economic cycles and offer recurring cash flows. For example, Healthpeak's focus on outpatient medical and lab real estate—sectors with stable demand—has supported its 3.0–4.0% same-store NOI growth guidance for 2025.

Conclusion: A Path Forward in a High-Rate World

The industrial REIT sector is demonstrating resilience through strategic capital structure optimization and disciplined debt management. While high interest rates remain a headwind, REITs with strong balance sheets, diversified financing sources, and a focus on high-demand sectors are well-positioned to sustain yields. Investors should prioritize REITs that extend maturities, maintain liquidity, and leverage non-traditional lenders to mitigate refinancing risks. As supply-demand imbalances ease and e-commerce continues to evolve, the sector's long-term fundamentals remain compelling for those seeking income-generating opportunities in a challenging macroeconomic environment.