Six years into a bull market, real estate investment trusts (REITs) in the US have grave concerns about access capital as they face the prospect of rising interest rates.

Concerns about access to capital, financing and liquidity were cited as major worries by 96% of REITs in the 2016 BDO RiskFactor Report for REITs. Credit risk, including concerns around credit rating and the ability to secure credit, is cited by 87%, up from 80% in 2015 and 55% in 2014.

REITs are worried that they may not be able to raise the capital required to finance assets and drive business growth – just as the prospect of rising interest rates sparks fears over indebtedness and the impact on credit metrics.

“REITs are eyeing the credit markets with a heavy dose of caution,” said Stuart Eisenberg, partner and national leader of BDO’s Real Estate practice, in the report.

“REITs worry about the potential impact of a rate hike on the value of income-producing real estate or that it might spur lenders to seek out higher loan-to-value ratios or debt yield requirements.”

Last week, Fitch ratings placed the ratings of Sovran Self Storage and its operating partnership, Sovran Acquisition, on “rating watch negative”, citing weaker credit metrics. “The weakening of the issuer’s key credit metrics upon the closing of the LifeStorage acquisition and execution risk to restore metrics, more than offset the headline improvements in portfolio quality,” Fitch said.

The trend is driven by a large portion of the REIT market continuing to trade at a discount to net asset value (NAV), as well as volatility in the CMBS market and conservatism in the bond markets, BDO said.

Debt financing, which is typically tapped to replace higher-cost acquisition financing, has become more difficult to obtain. As of early May, banks and other lenders had issued just $28.5bn (€25.5bn) in CMBS, compared with $44.1bn during the same time last year, according to Commercial Mortgage Alert, which tracks activity in the sector.

A recent analysis of REIT liquidity by Fitch Ratings analyst Zachary Klein concluded that limited capital issuance could put pressure on the liquidity of US REITs in the coming months. Liquidity has suffered a “meaningful decline” in 2016 after a year of strong REIT liquidity and record capital issuance in 2015, Klein said.

With the majority of REIT common shares trading at a discount to NAV, bond market pricing for REITs has “proved volatile,” Klein said, “resulting in many REITs turning to bank capital in the form of unsecured term loans and revolving credit facilities as alternate sources of capital.”

Those conditions look set to persist through 2016. “Many REITs are still having difficulty selling their common equity at a cost-efficient level,” Klein said. And in response to macroeconomic uncertainty, “risk premiums have widened significantly for REIT bonds.”

Because REITs pay relatively high yields, many are wary of the potential impact of rising interest rates on distributable cash flows and property values, BDO said. Risks related to indebtedness are cited by 96% of REITs as a top concern for 2016, up from 92% last year and just 75% in 2014.

While the Federal Reserve has so far delayed significant increases in interest rates, BDO said, with financing conditions clearly tightening, “many REITs are navigating the capital markets landscape with caution.”