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Today’s dearth of liquidity and price discovery has conjured comparisons with the Global Financial Crisis (GFC). And office debt delinquencies are beginning to reflect those years as well.

But the cycles are fundamentally different. In 2008-2009 a painful economic contraction encouraged companies and banks to hold onto cash. Today’s suppressed deal volume owes to high interest rates and uncertainty about their future path—quite different from central banks’ post-GFC zero-interest-rate policy—resulting in wide bid-ask spreads and less accommodative credit markets. Also, fundamentals today for most real estate sectors remain near historic norms amid unexpectedly sturdy economic growth.

While deal volume is down 60% (Q1 2024) compared with the 2022 peak, the decline is less severe than during the GFC. It should be noted that Blackstone’s flip of the Equity Office Properties’ portfolio in 2007 exaggerated the subsequent percentage decline in trading volume. We expect deal volume will stabilize further now that the worst of inflation is behind us, and the Fed appears to be done hiking rates. A pick-up in activity is likely, perhaps in early 2025, but we do not anticipate an investment volume boom because borrowing costs and cap rates are likely to decline more slowly than in past cycles.