Commercial real estate will begin its long-awaited recovery in late 2011 or 2012, according to the fourth-quarter Korpacz Real Estate Investor Survey, which questioned more than 100 real estate investors, including REITs, pension funds, private equity firms and insurance and mortgage companies.  Confirmation is provided by a PricewaterhouseCoopers survey, which notes that Washington policymakers are increasingly tweaking the strings that impact pricing.

According to the Korpacz survey, “Rental rates will continue to decline until strong, consistent job growth resumes.  With $1.4 trillion of commercial real estate debt maturing by the end of 2012, some property owners will not be able to survive the downturn.  Problems related to refinancing that debt could further delay a recovery in the sector.”

Government and regulatory policy will have greater impact on pricing than occupancy levels or rents, according to Real Capital Analytics, Inc.  “Policymakers control what happens to commercial mortgages in default,” Robert White, the president of Real Capital Analytics, wrote in a report.  They “have encouraged loan modifications and extensions even in cases where loans are above a property’s current value.  Tax policy, meanwhile, has made it easier for special servicers to negotiate with borrowers, a move meant to prevent a wave of maturity defaults and property fire sales.  Keep rates low and easing restrictions on foreign capital will also influence industry prospects.”  Real Capital Analytics notes that commercial mortgage-backed securities (CMBS) hold 42 percent of distressed loans; American banks 31 percent; and foreign banks 13 percent.