Is Commercial Real Estate Ever Coming Back? The Past, Present, and Future of Commercial Real Estate Market Cycles

January 17, 2024

Is Commercial Real Estate Ever Coming Back? The Past, Present, and Future of Commercial Real Estate Market Cycles

by Brett Hunsaker and Warren Tingen

Questions we hear all the time —

  • Will the commercial real estate market ever come back?
  • Will employees ever be back in the office?
  • How long will this last?

Believe it or not, the Commercial Real Estate (CRE) market cycle tells a optimistic story. Just as General MacArthur said, “I shall return,” so will the CRE markets, as they have time and time again over the past decades.

The ever-evolving world of commercial real estate (CRE) is a testament to the resilience and adaptability of markets in the face of many challenges. Over the past four decades, we’ve witnessed five significant downturns in the CRE sector, each triggered by different global events. Yet, every time the dust settled, the industry rebounded stronger. Let’s review these cycles and project into the future.

A Look Back at the CRE Down Cycles

  • 1980-82: High inflation, soaring interest rates, and the repercussions of the oil embargo rattled the global economy. Add to that the overbuilding in CRE, and it’s no surprise the sector witnessed a downturn.
  • 1990-93: The Savings and Loan (S&L) crisis culminated in the creation of the Resolution Trust Corporation (RTC). Paired with the rise of telecommuting and a major stock market drop in 1989, CRE faced a challenging landscape.
  • 2001-05: The turn of the millennium was marked by the dot-com bubble burst, followed closely by the 9/11 attacks. These events saw thousands of companies vacate their office spaces, especially in lower Manhattan.
  • 2007-10: The subprime mortgage crisis hit hard. Interestingly, while telecommuting gained momentum between 2005 and 2013, many firms that embraced full remote work models began recalling employees to offices by 2014.
  • 2022-Present: Unquestionably, the Covid-19 pandemic has brought about the most profound change in recent times. The subsequent economic fallout, coupled with rising national debts, inflation, and interest rate hikes, has created an uncertain environment for CRE.

The Present State of CRE

We are currently in the throes of a downturn catalyzed by the Covid-19 pandemic. The transition to remote work, prompted by global lockdowns, has dramatically affected CRE, particularly the office sector. The present scenario is somewhat reminiscent of the telecommuting trends that emerged in the early 2010s. However, the current situation has broader implications given its global scale and the rapid technological advances supporting remote work.

On the flip side, certain segments within CRE are thriving. Warehousing and logistics centers, for instance, are seeing an uptick due to the surge in e-commerce. Similarly, data centers are proliferating with the digital transformation wave.

Current Landscape and Projections

Next 1 Year: The pandemic’s most significant impact has been the normalization of remote work. Companies realized the viability of remote operations, leading many to reduce their physical office spaces. While this means a short-term dip in demand, the flip side is that there’s potential for CRE to diversify. Spaces can be repurposed – think co-working spaces, warehousing for e-commerce, or mixed-use developments.

Next 5 Years: The trend of urbanization isn’t going away. Cities will continue to grow, and businesses will always need commercial spaces. However, the nature of these spaces will evolve. We’ll likely see more hybrid models where offices are used for collaborations and meetings rather than daily work. Furthermore, sustainability will be at the forefront. Green buildings, efficient energy use, and other sustainable practices will not be just an added advantage but a necessity.

Next 10 Years: A decade from now, technology will play an even bigger role in CRE. Smart buildings equipped with AI, IoT, and other cutting-edge technologies will dominate the landscape. We can expect to see more flexible spaces, catering to ever-changing business needs. The CRE sector will also need to be prepared for potential challenges – be it another global crisis or the effects of climate change.

Positives Outlooks

The very nature of downturns means that there’s room for growth afterwards. With every cycle, we’ve seen innovations in the CRE sector. The rise of co-working spaces post the 2008-12 downturn is a prime example. Additionally, as technology becomes more integrated with our spaces, there’s potential for CRE to offer solutions that we haven’t even thought of yet.

Diversification of Use: The traditional usage of commercial spaces is evolving. With the rise of the digital economy, there’s a growing demand for data centers. Similarly, the healthcare sector’s expansion might increase the demand for medical office spaces.

E-Commerce and Logistics: The continued rise of e-commerce has led to a greater demand for logistics centers, warehouses, and distribution hubs, providing a significant boost to the industrial real estate segment.

Adaptive Reuse: There’s a growing trend towards repurposing old commercial spaces for new uses, like turning outdated malls into residential complexes or entertainment hubs.

Sustainable and Green Buildings: As environmental concerns rise, the demand for sustainable and green buildings is expected to grow, opening new avenues for developers and investors.

Hybrid Work Model: Although work from home has become prevalent, a hybrid model where employees work partly from home and partly from the office is gaining traction. This model still necessitates the presence of office spaces, albeit restructured for flexibility.

Challenges Ahead for CRE

External factors like global crises or economic downturns will always loom over the industry. There’s also the challenge of keeping up with rapidly changing business needs. While technology presents opportunities, it also poses threats.

Technological Disruptions: The rapid pace of technological advancement can lead to unforeseen challenges. For instance, the rise of virtual reality could change the way retail or office spaces are conceptualized.

Remote Work: The rise of remote work can lead to reduced demand for traditional office spaces. Companies might opt for smaller offices or co-working spaces, affecting the demand dynamics of the sector.

Economic Volatility: With concerns about national debt, inflation, and interest rates, the economic environment remains uncertain. Economic downturns typically result in reduced demand for commercial spaces, at least in the short term.

Overbuilding: Historically, periods of prosperity in CRE have sometimes led to overbuilding, creating a supply-demand mismatch.


History has shown us that the CRE industry is adaptable and resilient. While the challenges faced in each cycle differ, the sector’s ability to adapt and innovate remains constant. As the industry navigates the post-pandemic world, it’s equipped with lessons from the past and a vision for the future.


DeLuca, Marc. 2022. “What History Teaches Us About Inflation And Commercial Real Estate.” Forbes Business Council, July 18, 2022.

Morgan, Brady. 2023. “The Future Of Global Remote Work: Navigating A New Landscape.” Forbes Business Council, May 30, 2023.

Tasman, Gary. 2022. “What Smart Buildings Could Mean for the Future.” NAIOP, August 29, 2022.


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