Respondents first identified their roles in the business of distressed commercial real estate and then answered a series of related questions. This post is the first in a series of posts that reveals the answers to these questions.

Without being specific as to the region of the country or the asset type respondents were asked to forecast whether cap rates will go up, down, or stay the same and by how much, by June of 2010.

• Broker say cap rates would rise by 160 basis points.
• Investors predict an increase of 230 basis points.

The discrepancy may well be at the root of the current problem with deal flow. Investors are clearly waiting for a firmer bottom in expectation of significantly better deals. Commercial bokers meanwhile have a rosier, albeit still bearish, view of the market.

I’ve provided a graph of these forecasts below to put them in perspective. The following is a model of a property with an NOI (Net Operating Income) of $100,000 with a starting cap rate of 7.5%.

The most modest losses in this graph total more than $234,000 or about 18% while investors moght predict a correction in the value of thsi property of $414,000 or 31%. With these discrepancies in perception its easy to see why properties aren’t trading.

Stay tuned for the Part 2 where we’ll look at the loan types including multifamily, commercial, construction, and residential loans and what the reponses have to say about default rates.