The most significant event impacting commercial real estate in the last decade, in my view, is the financial meltdown that became apparent in August 2007. More than three years later, we are still feeling its effects. This financial dislocation has had a dramatic impact on the leasing markets—rising vacancy rates, negative absorption, softening rents and practically no new construction starts.

On the investment market side, there has been much pain as banks and borrowers deal with distressed assets. It will take some period of time before the investment market returns to normal levels of activity whereby: capital becomes available for riskier deals; CMBS returns as a significant element of the capital stack though in a more regulated form; distressed assets move through the pipeline; the appetite for risk spreads into the great, gray middle category of properties sandwiched between the two ends of the spectrum where investors are now focused: core assets in primary, supply-constrained markets and the subset of distressed assets that are marked down for a quick sale; leasing market conditions return to equilibrium; and construction activity resumes broadly.

The commercial real estate market in the current cycle is similar in some ways, and not so similar in other ways, to the last big market dislocation in the 1990-95 cycle. Leasing markets are as soft as evidenced by the national office vacancy rate of 18.0%, tied for the all-time record that was posted in the fourth quarter of 1990 and the third quarter of 1991. And the 40% decline in aggregate property values from late 2007 to late 2009 is in the same ballpark as value declines recorded in the early 1990s.

What strikes me as different this time is that the broad reputation of real estate, i.e. investors’ attitude toward real estate as an asset class, has weathered this cycle better than the early 1990s. A widely accepted theory in the 1990s was that the market would not need another square foot of office space until after the millennium or perhaps much later. No one knew where job growth would come from while some analysts thought technology in the form of laptops and e-mail would permanently reduce the need for office, retail and even warehouse space.

In the early days of the Resolution Trust Corporation, it took courage for investors to step up and buy those assets even at “50 Cents on the Dollar, Stupid” (the title of a piece back then by Solomon Brothers describing the plunge in property values). We can look back at those times now and think it was a no-brainer to load up on properties, but perhaps that it wasn’t all that evident at the time. Compare that with the current cycle where so much investment capital is parked on the sideline waiting for the right properties that bidding wars have returned when properties fitting that profile become available.

While commercial real estate has always been viewed as an inflation hedge, it is performing quite well in the current disinflationary economic culture—one more difference between the early 1990s and the current cycle. Properties that are well leased to credit tenants with minimal rollover risk are looking pretty good to investors compared with the risk that comes with stocks and the low returns available from bonds.

Thomas D’Arcy is president and chief executive officer of Grubb & Ellis Company and is responsible for the day-to-day management of the firm. He also serves as a member of the company’s board of directors. He brings to this position 25 years of successful leadership experience at various public and private real estate companies. Before joining Grubb & Ellis in November 2009, he was a principal in Bayside Realty Partners, a private real estate company focused on acquiring, renovating and developing land and income-producing real estate. Previously, he served as president and chief executive officer of Equity Investment Group, a private real estate investment trust, as well as chairman and chief executive officer of Bradley Real Estate, Inc., a NYSE-listed REIT. D’Arcy has been the non-executive chairman of Inland Real Estate Corporation since 2008 and a member of the board since 2005.