What Past CRE Cycles Teach Us About Today’s Reset

Important Disclosure: The views and opinions expressed in this article are those of Bill Grubbs, CIO, and reflect his personal perspective as of the date of publication, informed by professional experience, ongoing market observations, and qualitative assessments developed over time. This commentary is not intended to be, and should not be construed as, investment advice, a forecast, or a prediction of future performance. The observations shared do not rely on or present specific statistical analyses. Actual market conditions, outcomes, and performance may differ materially. Past experience is not indicative of future results.

March 2026

Drawing on decades of experience across multiple real estate cycles, Bill observes that across the early 90s downturn, the dot-com era, the Global Financial Crisis, COVID, and today’s reset, the market has consistently repriced around a few recurring forces.

In this Q&A, Realberry CIO Bill Grubbs shares what he’s learned across decades of investing through multiple cycles, including what, in his experience, generally drives real estate repricing, what may be different than previous cycles, and what signals the return of liquidity and the beginning of a new cycle.

His key takeaway: Today’s cycle is about fundamentals, not financial engineering.

His assessment is the recently ended cycle, from roughly 2010 – 2022, was largely characterized by investors “riding the wave” of low and continuingly declining interest rates, rewarding most all owners regardless of real estate investment acumen. He asserts, however, that this new market cycle will separate the winners from losers based on the ability to select the right specific assets, as well as strong execution skills.

In Bill’s view, the next phase of the cycle may be more likely to reward investors who focus on:

• Disciplined basis: Yields go up and down, but your beginning investment basis remains.

• High-quality assets: Those that consistently garner strong tenant demand that best fits the market – both functionally and locationally.

• Strong sponsors: An “operating oriented” sponsor with strongly supported convictions.

His perspective is that execution at the asset and market level is foundational to success in the new cycle and real estate is returning to what it has always been at its core: a local, operational business where performance is earned.

Q: If you had to summarize each major real estate cycle from the past 30 years in one sentence – in your opinion, what broke, what reset, and what ultimately recovered first?

Bill: I see a pretty consistent pattern: too much capital (debt and equity) and overly aggressive underwriting drive the market to a breaking point, often triggered by an economic shock. It’s my experience that values truly reset only once transactions start happening again, and the sectors with the strongest fundamentals and resulting liquidity generally recover first. The is my interpretation of each major market reset over the course of my career:

• Early 90s: Too much supply (capital) and leverage broke the market, valuations took years to reset due to limited transparency, and recovery was slow (5+ years) but steady once the debt issues started being recognized, and pricing finally reflected reality.

• Dot-Com (early 2000s): The downturn was mostly isolated to tech-driven office markets, pricing corrected quickly where demand evaporated, and most other property types recovered fast because the broader market largely stayed intact.

• Global Financial Crisis (2008–2009) (“GFC”): Liquidity froze as a result of global economic shock almost overnight as liquidity immediately dried up, and values reset rapidly. Multifamily recovered early because financing sources like Fannie and Freddie continued lending for that asset class through most of the downturn.

• COVID (2020): The economy paused abruptly and uncertainty spiked, but capital markets reset quickly, rates dropped hard, and the capital market recovery came back fast driven by exceptionally low interest rates. It should be noted that with the exception of office properties, tenant fundamentals remained solid all the way through.

• Today’s Reset (2022–present): The sudden and material increase in interest rates, dramatically increased the cost of capital and repriced the market after quickly ending the low-rate era. The recognition of the reset values has taken time as owners and lenders accept and work through valuation reality. The recovery from a performance perspective is showing up first in high-quality assets where NOI growth is achievable through execution and there is liquidity at the asset level based on investors’ confidence.

And, once again, to me the key difference today is that we’re no longer all riding a wave – in my opinion, returns are going to be earned through basis discipline, asset selection, and real asset-level execution.

Q: In your experience, what is the most consistent driver of real estate repricing across market cycles?

Bill: In my experience, the most consistent driver of real estate repricing is too much capital and over-leverage - and the behavior (aggressive underwriting and overconfidence) that comes with it.

Not really a positive, but real estate is a deal-driven business. In my experience, people love to transact, and when capital is readily available, underwriting discipline tends to loosen. That’s when “animal spirits” show up - and investors generally start pushing deals they probably shouldn’t.

I’ve learned over time that sometimes the best deal is the one you don’t do. There are moments in the cycle where it seems to makes sense to lean in and be more aggressive, but I believe that cycles often turn when the market collectively loses discipline.

One reason I compare today’s environment more to the early 90s than the GFC is because it’s taking longer to work through. In the early 90s, it took years for the market to fully recognize and write down values. Back then, transparency was limited. Today, technology and data have made pricing more visible than ever before, but it can still take time for both private and institutional valuations to accept the reality of lower valuations – in the GFC, there was no choice.

Q: Do you think today’s commercial real estate environment similar to 2008?

Bill: Not really, and I think a lot of people compare everything to 2008 simply because that’s the only major cycle the majority of today’s investors remember clearly.

The GFC was a severe and sudden shock. It was driven primarily by residential housing, but it hit commercial real estate hard because lenders stopped lending and pricing uncertainty spiked. That was the only period in my career where I felt genuinely fearful, not just about real estate, but about the broader system.

But what’s different today is the duration and the setup.

This cycle has been slower to unwind. In the early 90s, real estate issues dragged out for about five years. That environment also came after too much supply, too much leverage, and overly aggressive underwriting - which, in my view, feels more similar to the conditions that built up through the low-rate era and accelerated in 2021 and 2022.

During the post-GFC cycle and especially the post-COVID boom, it felt to me like investors were essentially riding a wave of falling interest rates. Even if you weren’t perfect at the asset level, declining cap rates could lift outcomes. I don’t think that’s the case today.

Now I think returns will be much more driven by the fundamentals and execution of each asset.

Q: From your perspective, how do you think interest rates, cap rates, and credit spreads interact during a reset?

Bill: I think real estate is sensitive to interest rates because it’s a leveraged business - and cap rates tend to be anchored to long-term interest rates, especially the 10-year U.S. Treasury.

In my experience, while developers and operators often focus on floating-rate debt because it generally can help deals pencil in the short term, for the most part real estate is a long-duration investment. So, to me, long-term rates matter most in how cap rates are priced.

I’ve seen that when the 10-year Treasury moves meaningfully higher, it tends to force repricing across the market. That’s the primary reason values corrected in 2022, when rates suddenly moved off historic lows and the Fed began tightening to normalize inflation.

One important point in today’s market is that cap rate spreads relative to the 10-year are still fairly tight compared to historical norms. That doesn’t necessarily mean real estate is “expensive,” but to me that indicates that we should be careful about underwriting aggressive exit cap rates – our focus on basis is critical.

In my opinion, in this environment, relying on cap rate compression to generate returns is not a prudent strategy.

Q: What do you think are the early signs the market is moving from price discovery into a true transaction environment again?

Bill: I think the biggest sign is simple: transactions providing tangible clarity of actual market values.

Generally, price discovery becomes real when deals actually trade. Even then, I’ve seen many institutional owners still carrying assets at values based on appraisals or internal marks that may not reflect true market pricing.

In my experience, a functioning transaction environment requires a few things:

• More stability in interest rate expectations

• More confidence in the economic outlook

• Sellers willing to recognize market reality

• Buyers willing to deploy capital at the new basis

Once values are more clearly established, in my experience, capital should begin flowing again - and that momentum builds on itself. Of course, the context of the overall economic outlook is also foundational.

From what I’ve seen, transaction activity has increased over the last six months. It varies by property type and market, but it appears that the market has begun to re-open.

From a more subjective psychological perspective, if there is a sense that most investors have evolved to the fourth stage of grief – acceptance – it’s a good indication that transactions will gain traction.

For further current context, fundraising has slowed dramatically from the 21–22 peak, and many investors are still constrained by limited distributions from existing investments. So, I see that while capital is returning, it’s selective and patient.

Q: When capital markets dislocate, what do you think matters most: asset quality, sponsor execution, or basis?

Bill: In reality, I think you need all three.

But in today’s cycle, I’m emphasizing execution more than ever for our assets. We’re not in a market where everyone benefits from falling interest rates. In my opinion, returns are going to come from the ability to grow operating income at the property level.

In my experience, asset quality matters as well - and in certain sectors, it matters dramatically more. Office is the best example. There has been a real secular shift in office demand, and only the top tier of buildings will truly thrive. Lower-quality assets may struggle for a long time, even if purchased at a steep discount.

Hotels are another category where execution matters disproportionately because they’re operating businesses.

In sectors like multifamily, industrial, and certain retail formats, there may be a broader range of asset quality that can still perform - but even there, strong asset management and sponsor capability are key differentiators in my view.

Basis is foundationally important, especially in sectors like office where capital expenditures and leasing risk can be enormous. A low entry price doesn’t automatically mean a good investment if the asset requires significant reinvestment to remain competitive, or there just plain is not the needed demand (some things are cheap for a reason) - but there is inherent protection to be adequately below replacement cost.

Q: In your experience, what do investors misunderstand most about real estate cycles, especially after the low-rate era?

Bill: I think many investors underestimate how much real work, expertise, and capital it takes to create performance in this environment.

From my perspective, the long low-rate era made it relatively easy to ride the wave, as cap rates compressed, interest rates declined, and asset values often increased even without exceptional execution. Today, that tailwind is gone.

Now, I think outcomes will be driven by bottom-up decisions: selecting the right asset, in the right market, on the right street corner, at the right basis - and then executing the business plan at a high level.