Fish adds that “In the following months, we expect to see lenders move increasingly up the risk continuum as we’re still in a low overall yield environment, and there’s a high demand for yield generation.”

According to Mike Melody, co-head and executive managing director of Jones Lang LaSalle’s real estate banking practice, “The primary impediment to financing will be the significant number of overleveraged assets that still require recapitalization and deleveraging. However, a lack of capital is definitely not the problem. With more capital than transactions currently available, borrowers will be placing a greater emphasis on asset type and real estate risk, with core market multifamily and office receiving the best terms.”

Competition, he says, is affecting investment sales terms as cap rates peaked in the first quarter of 2010 and are now clearly compressing. “At one end of the spectrum, robust demand for trophy office properties in top-tier and some secondary markets has pushed cap rates down by nearly 200 basis points and caused values to rebound by up to 50% from the market’s trough in certain cases,” he says. “Interest in multifamily properties has also been very strong and is expected to stay that way due to pent-up demand as the residential housing market remains weak and potential renters are tired of living at home, or sharing space with roommates.”

Tom Melody, co-head and executive managing director of JLL’s real estate investment banking practice is “bullish on the state of commercial real estate financing and activity for 2011.” Granted, he says, “we’re starting from a much smaller base of transactional volume than we were four years ago due to stricter underwriting, but values have stabilized and capital has definitely returned to the marketplace. Opportunities abound and we are poised to capture them for our clients.”

Delta Associates also considers conditions ripe for a market rebound. “While there is much more ground to cover, the rebound is in full effect,” Delta says in a recent report. “Risk has been repriced and investors with access to capital are pumping life into the market.”

At year-end 2010, the company saw several key themes emerge in the investment sales market: “Core assets, especially trophy product and high-rise apartments in major markets, are generating competitive buying situations; Distressed assets, which we thought would drive market activity in 2009 and 2010, never became a major source of transaction volume in this cycle; Distress is now declining in select metro markets and has stabilized nationally; and the demand for space is rising as fundamentals improve, so prices are rising based on performance as well as cap rate compression.”

According to Delta Associates, although threats remain, notably the vast number of loans maturing in 2011 and 2012, “lenders have shown a willingness to work out new terms, and so far, distressed assets have not been a major stumbling block to a real estate recovery. We expect an improving national economy and an improving commercial real estate market in 2011.”