There is an advantage to the big boxes leaving prime locations open throughout the recession. David Moret, a partner with CREC in Miami, notes that a lot of retail infill has been happening over the past few months. The secondary markets are still suffering, since residential vacancy still persists, but Orlando, Tampa and Dade County have all seen leasing tick up, in spite of stagnant employment numbers.

However, Moret notes, some notable brands used the exiting of shops such as Linens n' Things and Circuit City as a way to break into the market, especially in Atlanta and South Florida. "You have Dick's Sporting Goods, Aldi, hhgregg, Buy Buy Baby," he says. "Retailers that weren't in the market before have started to build a footprint in those areas. They have to keep expanding to make it work. You can't just put up two stores in a market."

But in terms of workouts and purchases, Fay explains that note sales are what's happening in Florida right now. "This is a slow drip," he says. "It's not like the residential market, which fell off a cliff. This is a prolonged down slope. Why? There are a lot of note sales going on." Fay explains that Colliers' 2010 deals in South Florida were 85% distressed and, of that, 35% were note sales. That's out of $420 million of total business. He points out that the problem with note sales is that it simply pushes the foreclosure process onto someone else.

This leads to some mothering of invention. "We're seeing a lot more creative ways to clean up the bank's balance sheet or CMBS through a note sale," Fay observes. "We are seeing ourselves in a circular sales pattern."

Colliers has been dealing in a lot of troubled-asset and note sales. The bank or CMBS sells the loan, the new owner has the loan foreclosed upon, followed by a property sale. Fay estimates the loan is held from six to 18 months, after which it's sold to a second investor who holds it up to three years, before he too sells it. The final investor holds onto it. But as Fay points out, this is a five-to-seven-year pattern of gaining value from these notes and their underlying assets.

William Shippen, principal at ARA's Atlanta office, looks to some of the more complicated local properties that will be working their way into defaults over the next year or two. Over the past two years, he points out, the special servicers were working through the "inspirational properties, those that just fl at-out did not work." But now, Atlanta is moving into the term defaults. The difference is that now, some of these properties will be operational and just have a bad loan. There is opportunity in retail and office, but not as much in multifamily, since single-family home rentals in Atlanta are still shaving renters from the apartment sector.

"You'll see a move up the food chain," he says. "The past two years saw the worst of the worst deals, but now with these term defaults you'll start seeing functioning apartment complexes that have occupancy. They're not in bad condition, but they just won't support the kind of debt that was being offered in '07 and '08."

He sees real opportunity in "failed value-adds." These properties, he explains, owe 60% to 70% of the loan amount, "but the property has already been rehabbed, it has occupancy and typically, it's in a good or better location. But that generally is around centers of employment, preferably office employment." He points out that class A space has become ultra-competitive in pricing because of the low volume of properties for sale. Owners are holding onto them while they can.

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