Real estate is known for high risk-adjusted returns and its diversification qualities. However, apart from traditional volatility-based risk measures, institutional investors also have to manage the interest rate risk of their portfolios. In practice, the interest rate sensitivity of the assets must be matched with the interest rate sensitivity of the companies’ liabilities. Regulation standards like Solvency II incentivize life insurance companies to minimize their interest rate risk exposure by requiring large amounts of economic capital to cover remaining interest rate risk. Furthermore, the current low interest environment raises the question of how sensitively real estate assets react to positive interest rate shocks. We estimate the interest rate sensitivity of real estate empirically, using a panel regression model. We find a strong link between the level and the term structure of market interest rates and the valuation of real estate. By dividing our sample into different subsamples, we identify both interest shock sensitive and interest shock robust submarkets. To the best of our knowledge, this is the first study analyzing the influence of interest rate shocks on real estate valuations based on actual portfolio data of a major life insurance company.