Private real estate values are declining, so is deal volume, as sellers are reluctant to transact at the new, lower levels where buyers are interested.

Three drivers of private real estate repricing

For the first time since the great financial crisis (GFC), private commercial real estate (CRE) valuations are experiencing sustained quarterly losses; prices fell 5 percent in the fourth quarter 2022, 3.2 percent in the first quarter 2023 and 2.7 percent in the second quarter, as measured by the NCREIF ODCE Index (see “Private real estate returns,” page 38). To put this in perspective, the fourth quarter 2023 decline is the fifth largest since 1978, and the first quarter 2023 decline is the eighth largest.

And without knowing exact timeframes, we are expecting a weighted average drop of around 20 percent in CRE prices peak to trough with the weakest assets and capital structures falling first and furthest.

This repricing warrants a certai