The end of the Fed’s aggressive monetary tightening and the beginning of a new easing cycle is hopeful news for commercial real estate performance.

History bears out this optimism. Looking at NCREIF Property Index (NPI) all-property total returns, commercial property has consistently performed well for one, two and three years following the start of a new rate-cutting cycle. The exceptions are the three-year periods following rate cuts in 2007 (Global Financial Crisis) and 1989 (Savings & Loan Crisis) when credit markets were constrained.

Besides a more accommodative monetary policy backdrop, near-term property performance could be further boosted by a resilient economy and continued NOI growth. There are already signs of revived investor interest and a pickup in investment activity. As always, not all sectors will perform equally. The office sector remains particularly challenged by historically high vacancy levels and the prospect of financial distress.