Trickle or Torrent? That is the question. From recentconversations with industry insiders on the subject, there seems tobe two distinct camps currently forming: Those that believe we areon the cusp of a huge commercial real estate liquidation, and thosewho say that the market will work itself out and that the numbersof distressed assets actually trading hands will be modest.GlobeSt.com asked readers in last week's Quick Poll that exactquestion, and out of 353 respondents, 37% said there will be atrickle, while 63% expect a flood of commercial foreclosures. JohnStrockis, executive managing director of asset services at VoitReal Estate Services, says the answer is mixed and took just aquick moment to provide a little more thought on the topic.

"Recent data suggests that the long awaited commercialforeclosure 'momentum' is starting to build. In 2009, mostfinancial institutions were still finalizing work-out/foreclosurestrategies, staffing special asset managers and finally gettingtheir arms around the ever increasing workload of defaulting loans.Coming into 2010, well-capitalized banks that have reserved forloan losses are now ready to move more aggressively towardsforeclosure. Due to rapid declines in rental rates and propertyvalues, fatigued borrowers are just beginning to accept the newpricing realties and with little hope of rapid recovery untilsometime in 2012, they are acting accordingly and starting theprocess of giving their properties back to the banks.

According to a recent article on the subject, CMBS loan defaultsthat were at least 30 days late increased to 4% from approximately1% a year earlier. While this trend may foretell more CMBSforeclosures, be mindful of the many issues special servicers mayconfront, such as valuation and tranche warfare betweenbondholders, before a property is taken back. Likely defaultingcommercial assets secured by CMBS debt may be subject to a longertimeline from default to workout phase and ultimately take longerto foreclose.