A man in the 80s with a cell phone appropriate for that era

80's Real Estate Collapse: Trammell Crow Memo Lessons Relevant in 2026

Dan Wentz

As I enter the midpoint of my career, one of the most valuable lessons I've learned is those who came before us possess an abundance of knowledge that can simplify our paths and help us avoid costly pitfalls.

In Commercial Real Estate especially, where cycles repeat with eerie predictability, tapping into that hard-earned wisdom is one of the smartest moves any of us can make. A CRE-specific example is the legendary Trammell Crow Company memo from 1989, titled "Lessons Learned in the Southwest."

The memo was born out of the brutal Southwest market collapse of the late 1980s triggered by overbuilding, the S&L crisis, oil shocks, and soaring vacancies (approaching 30% in key markets like Dallas). This 100+ page compilation of candid reflections from regional partners and executives stands as a rare act of corporate humility. Gary Shafer, then a key managing partner, asked his team to dissect what went wrong in strategy, personnel, overhead, and individual projects, while also capturing what they got right and timeless principles for any market.

They produced brutally honest insights that still resonate decades later: pride delays tough decisions, good markets hide mistakes while bad ones expose them mercilessly, cash is king, debt can be deadly, talent matters most in downturns, and conservative underwriting wins the long game.

By listening to the voices of those who've already weathered storms like the one we're navigating today, we gain shortcuts to better risk management, sharper discipline, and greater resilience. Seek out mentors, read the old memos, ask the retirees what they wish they'd known sooner, because the collective experience of those who've "been there" is one of the few true edges in this cyclical business.

Here are some of the lessons from that memo.
DOWNLOAD THE FULL MEMO

Strategy

  • Manage Risk and Liability Conservatively: Avoid personal or full recourse liability, especially on land and long-term deals. Trade equity for reduced liability (e.g., 60/40 splits instead of 50/50 with recourse). Move to non-recourse loans quickly, and don't take on obligations disproportionate to ownership (e.g., 100% liability for 50% ownership).
  • Sell During Peaks, Don't Hold Everything: Implement an ongoing sales program to capitalize on hot markets. Sell high-finish projects and excess inventory when cap rates and interest spreads favor it—don't treat every project as a long-term hold. "Cash is king" in downturns; retain liquidity for opportunities rather than investing in losing projects.
  • Control Inventory and Avoid Overbuilding: Lease first, build second—don't start projects just because capital is available. Limit land holdings to 2-3 years' needs; excessive positions lead to devaluation in soft markets. Pioneer unproven areas only with minimal risk.
  • Be Market-Responsive and Conservative in Projections: Lead rate reductions in declining markets (first markdown is smallest). Don't extrapolate growth from recent trends (e.g., rents won't always rise 5% annually; they can drop 25% in a year). Use worst-case scenarios; avoid relying on inflation or exponential job growth.
  • Diversify Revenue and Focus on Fees: Shift to fee-generating activities like third-party management, brokerage, or construction when development slows. Don't rely on development fees for overhead.

Personnel

  • Hire Quality and Stay Lean: Recruit top talent who can adapt and grow into roles; avoid mediocre hires that are hard to fire. Build bench strength in leasing and management—future partners may leave declining markets. Use contract labor for non-core roles to ease adjustments.
  • Act Quickly on Underperformers: Terminate marginal employees early; tough markets make it easier to upgrade with better people at lower costs. Don't overstaff in booms—it's easier to hire than lay off.
  • Maintain Morale and Communication: Warn staff about market realities to manage expectations on raises/benefits. Work on morale starting at partner level; delegate to keep focus on solving problems. Encourage fun and celebrate wins in offense (new deals) and defense (workouts).
  • Develop Versatile Teams: Hire people who can "switch hit" across functions. Keep a nucleus in place but run lean—don't cut muscle.

Administration and Overhead

  • Cut Costs Early and Thoughtfully: Overhead control is critical as fees shrink; monitor all payments and eliminate non-essentials (e.g., car phones, free drinks). Run lean but preserve key capabilities like construction management.
  • Implement Strong Controls and Reporting: Use top-notch controllers for accurate, timely info. Understand costs per business aspect; delegate admin to free partners for external focus. Avoid long-term high-rent leases or contracts signed at peaks.
  • Involve Staff in Savings: Educate employees on overhead; let them generate cost-saving ideas for buy-in.
  • Adapt Structure to Market: Shift from development-focused to leasing/management-oriented. Consolidate for efficiencies (e.g., shared networks); bill back costs to projects where possible.

Individual Projects

  • Maintain Strict Underwriting: Don't do marginal deals because money is available; ensure projects work on conservative estimates (e.g., 90% occupancy, today's rents without increases). Compare to replacement cost in down markets.
  • Avoid Speculation and Overpaying: Don't speculate on demographics without infrastructure. Be hands-on; investigate thoroughly (environmental, structural) to avoid surprises with shrinking margins.
  • Focus on Quality and Functionality: Prioritize location, credit tenants, and functional design over bells/whistles. Sell anchor pads cautiously; stagger leases; avoid two-story retail/R&D or asphalt lots for long-term holds.
  • Engage Partners and Lenders Proactively: Meet outside partners to align on plans—don't assume. Take aggressive positions with banks early; build teams (lawyers, accountants) for workouts.
  • Product-Specific Lessons:
    • Land: Limit to short-term needs; use long-term loans without calls.
    • Office: Start late rather than early; prelease high-rises; watch long cycles (15-40 months to lease-up).
    • Retail: Secure anchors first; balance national/mom-and-pop tenants; avoid secondary sites.
    • Industrial: Sell high-finish space; stick to triple-net leases; no credit, no deal.

General Universals/Axioms

  • Good Markets Hide Mistakes, Bad Ones Expose Them: Stay disciplined always—don't get caught in frenzies or assume "it can't get worse."
  • Be Tough on Tenants and Banks: Strict credit checks; quick action on problems; make banks contractual parties for liens.
  • Quality and Relationships Matter in Tough Times: Credit quality projects/tenants; nurture brokers, lenders, and partners.

Where are we today?

In March 2026, as the commercial real estate sector stabilizes with improving liquidity and rebounding transaction volumes (full-year 2025 volume reached $560.2 billion, up 14.4% YoY per Altus Group, with forecasts for a further 16% increase to $562 billion in 2026 per CBRE), these hard-won insights offer more than historical curiosity: they provide a disciplined framework for navigating uncertainty. Selective strength shines through in industrial and data centers (where demand is surging, new supply is slowing, and vacancy remains low amid AI/hyperscaler growth), multifamily (with slowing supply supporting rent stability), and retail (undersupplied with strong consumer-driven performance), while office continues its uneven recovery (national vacancy stabilizing around 20.5% at end-2025 per Cushman & Wakefield, with positive absorption in quality spaces and the smallest YoY increase in years). By embracing conservative underwriting, prioritizing liquidity over endless expansion, acting decisively on costs and talent, staying lean without cutting muscle, and always remembering that good markets hide mistakes while bad ones expose them mercilessly, developers can not only survive downturns but position themselves to capitalize on the inevitable upswing.

Next Steps

Download the full memo, discuss it with your team, and apply its principles rigorously because the preparation you do today will determine who thrives tomorrow.