How to Hedge, Diversify or go Short in Real Estate to Mitigate Risk in a Downturn

I'm starting a new RE Acquisitions job in a couple of weeks, and one thing I've been wondering quite a bit is how RE Investment shops can mitigate their risk in a downturn. I get that you can look for a certain yield spread, but when you think of other Asset Managers, they can diversify their portfolios across asset classes, use hedging strategies or even go short and potentially protect (or make a killing) during downturns. None of this seems possible with a Commercial RE portfolio.

Is this what makes RE so cyclical and volatile in nature? It seems like the only solution is to keep a lot of cash on hand and look for distressed debt opportunities or cheap buys during a down-turn.