Another trend Saykaly and his associates are seeing is "front load bell curve pricing." This strategy involves "motivated investors, many of whom are new to the market, coming in and outpricing the bulk of the active bidders who were group in a tight range."

Saykaly says "aggressive pricing continues to be assisted by the narrowing of CMBS spreads and creative loan structures from traditional lenders." Some creative concepts include hybrid interest only and 30-year amortization, allowing the spread between the cap rate and the leveraged cash on cash to exceed 550 basis points, the NewBridge executive says.

"The abundance of capital created new equity structures for developers, owners and investors to exploit for their acquisitions, developments and recapitalizations, providing increased profits over the traditional JV structure, such as gap equity, forward takeouts, preferred equity and mezzanine," Saykaly says.

He and his associates also have noticed that earlier market predictions on cap rates rising sharply in 2004 haven't occurred so far. "Investors expected that with the improvement of the stock market and the resulting outflow of capital and potential increase in interest rates, cap rates would start increasing," Saykaly says. "However, this has not been the case for quality retail centers, both anchored and unanchored."

He says that while there has been an outflow of capital from real estate back into the securities market, "there remains excess demand, which is keeping cap rates from being impacted at this time." The broker says "many of these securities market investors have now seen the benefits--that is, diversification--of real estate investment and will continue to allocate some portion of their funds into the asset class."

Saykaly adds, "Attractive spreads and Treasury rates continue to provide investors with positive leverage on aggressive transactions. Treasury rates, which should be moving up due to improved economic data, remain low."

"Who would have ever thought that actions of the Bank of Japan, such as keeping their exports competitive, would impact the pricing of commercial real estate in the United States?" he adds.

If rates do increase sharply, cap rates "will eventually be impacted," Saykaly says. "On a short-term basis, the pent-up demand and use of shorter term structures might minimize the initial increase, but eventually they will give."