It is true that the capital markets have dried up and investment sales have slowed down. Nevertheless, commercial real estate in America, and especially in New York City, is an asset favored by investors from around the world.

Industry experts are in disagreement about the depth and breadth of the slowdown. A few real estate leaders feel that the season of discontent for real estate may last far past this summer and go on for at least 18 months.

The president and chief executive of Cushman & Wakefield, Bruce Mosler, said recent changes in the credit markets, including more stringent underwriting criteria, the higher cost of capital, and higher equity requirements, would likely have some near term impact on the market. There is potential for a lower volume of property sales for the next 3-to-6 months, he said, and for fewer bidders as private investors lose access to capital.

Already, Mr. Mosler said, real estate investment trusts, pension funds, insurance companies, and traditional institutional investors that are in a position to place more equity into their transactions, have replaced private equity buyers in the lineup for available properties. In the near term, there is a potential for a slight reduction in some property values in direct correlation to the cost of capital and repricing of risk, he said.

“It’s too soon to project definitely what the full extent of any financial market or debt market impact will ultimately be, and economists predicting recession for now are in the minority,” Mr. Mosler said. “However, there are a few telling observations to be made: Manhattan office vacancies are near historic lows and rents are at historic highs. New commercial construction has been limited in recent years, and the majority of that product has been pre-leased. These are the underlying fundamentals that have enabled commercial property values to rise to record highs, and they are the same fundamentals that we see in the market today.” Appearing on my television show last week, the chairman of Signature Bank, Scott Shay; a managing director at RBS Greenwich Capital, Chuck Rosenzweig, and a partner at Apollo Real Estate Finance, Brad Wildauer, all agreed the difficulties in the capital markets would definitely have an effect on sales of commercial properties as well as on the abilities of borrowers to fund the acquisitions.

As reported in an international real estate trade newsletter, “The subprime shock transmitted from the U.S. mortgage market has put a full stop on the euphoric phase of property investing and shifted the focus onto risk, rewards, and yields, ushering in a more mature phase. The whole issue is how long this repricing period is going to last and, when it’s finished, what the new capital market is going to look like”

A recent report from Wachovia Securities said, “Commercial real estate sales prices could drop 5% to 10% and sales volume could drop by 50% to 60% in the coming months as a result of the disruption caused by the fallout in the subprime residential mortgage-backed securities market.”

Many industry leaders believe that the market has temporarily dried up and there will be an adjustment in terms of sales, pricing, and financing.

“Right now, there seems to be an impasse between buyers and sellers,” the chief operating officer of Citi Habitats, Gary Malin, said. “There are fewer qualified buyers in the market due to the capital market situation, so there has been a natural thinning of the number of buyers in the market. Those buyers still remaining are somewhat uncertain and expect to see some correction in pricing, due to the state of the capital market. Sellers, on the other hand, are upset that they may have to reevaluate their price or are not going to see the outrageous appreciation in property value as they would have seen prior to the subprime situation.”

“Those sellers asking well above market with overly inflated prices in order to flip the property for a substantial profit may take the property off the market for sale and instead hold and rent the property, since the rental market remains quite vibrant,” he continued. “Overall, I believe we need to see how all this uncertainty unfolds over the next several months to accurately gauge the effect on the market.”

The senior broker at Besen Associates, Adelaide Polsinelli, said, “I have seen many development deals fall apart in the past two months. That market is all but dead at the moment. Buyers are not paying up for the opportunity to build into a queasy market.

“Transactions which are income producing are still trading at 4% to 5% cap rates,” Ms. Polsinelli continued. “Buyers for this product type are buying for the long term and have the ability to invest as much cash as is necessary to close the deal, even if the lending institution they are financing through reduces the loan.

“While the sky is not falling down on this segment of the market, I do anticipate some tug of war between buyers and sellers, as everyone will use the headlines to their own advantage,” she added.

One person who disagrees with many of the real estate leaders is the senior partner at Massey Knakal Realty Services, Tim King, who said, “In our Brooklyn office, we had record months in July and August with more contracts signed than at any other time in our 5-year history. There is a lot going on in our industry at this time. Having witnessed inflation, deflation, stagnation, Reagan economics, voodoo economics, and dot-com wackiness, it is easier to accept that the marketplace is always in a state of flux and that those who are surprised by blips, bumps, and busts are probably best suited for a career in a different industry.”

Even in these turbulent times, a number of properties have been sold to local and foreign investors. Last month, Italy’s third largest real estate company, Risanamento, purchased the office condominium on the upper floors of the Barney’s building at 660 Madison Ave. The investors paid the second highest recorded price ever for an office building, at $1,453 a square foot, or $369 million, for the 254,000 square foot building.

Also last month, Africa Israel Investments, a company whose main investor is Lev Leviev, closed on the purchase of the former New York Times Building at 229 W. 43rd St. It paid $525 million, or $680 a square foot, for the building recently vacated by the Times. As I reported earlier this year, the seller, a joint venture of Tishman Speyer Properties, tripled its investment when it purchased the building a few years ago for about $185 million. This fall, a third foreign investor, Somerset Partners, will be closing on the purchase of 450 Park Ave. They will be paying about $510 million, or $1,570 a square foot, the highest price ever paid per square foot for an office building in the United States.

Seems like investors are very interested in owning properties in the Penn Station area. The largest owner of office buildings in New York City, SL Green Realty, has retained an investment broker to sell the office building at 440 Ninth Ave. The building, which is located at the corner of West 34th Street and Ninth Avenue, is the home of B&H Photo, which occupies about 93,000 square feet. A few months ago, SL Green announced it would be purchasing 333 W. 34th St. for $183 million, or about $530 a square foot from Citigroup Global Markets. The 10-story building, built in 1954, located between Eighth and Ninth Avenues, one block from the future location of the new Penn Station. In August, the office building at 14 Penn Plaza, also known as 225 W. 34th St., was sold for $350 million, or $759 a square foot.

Next month, a joint venture of SL Green and the City Investment Fund will be closing on the purchase of the office building at 16 Court St. in Brooklyn. The joint venture is paying $107.5 million or $338 a square foot for the 38-story office building, which was built in 1928 and is Brooklyn’s tallest office tower. It is on Cadman Plaza at the intersection of Court and Montague Streets in Brooklyn Heights.

Cushman & Wakefield has been retained to sell the 24-story, 282,000 square-foot Art Deco building located at 475 Fifth Ave. at the corner 41st Street. More than 85% of the building can be delivered vacant to the new owners, who can re-skin the structure into class A office building. The building is directly across the street from the New York Public Library and across from 485 Fifth Avenue, which is being renovated into a Global Hyatt Hotel.

Speaking of hotels, just yesterday, the Rhode Island-based Procaccianti Group, who were represented by Cushman & Wakefield, announced their purchase of two Manhattan hotels: the 300-room Tudor Hotel at The United Nations and the 227-room Holiday Inn SoHo.

“We have been interested in the NYC market for some time and despite the significant asset appreciation that has occurred over the last few years, we believe it to be one of the best long term investment markets in the country and the world,” the chief investment officer for the Procaccianti Group, Robert Leven, said.

In contrast to those who preach doom and gloom, a few real estate leaders are more bullish on the current state of the market. As Tim King of Massey Knakal said, “A year ago everyone was talking about real estate and how they were making a killing. I can remember back in the late 1980s telling my wife that the end was near because my banker had just finished telling me how he was a genius in the real estate marketplace. Unfortunately, now too many folks talk about the decline in the market. The market is enormously efficient, like water it always seeks its own level. The problem was that people may have paid too much for a property, and lost sight of the fundamentals.”

So that prompts the question, “What is reality realty?” Mr. King continued. “The answer, as always, is it depends. There are still plenty of buyers in the marketplace and motivated sellers. Those folks with a sense of history and a basic grasp of sound investing strategies will continue to survive and even thrive.”

I have to concur with Bruce Mosler of Cushman & Wakefield when he says, “For the highest quality assets, however, barring any drastic reduction in employment, the Manhattan market in particular looks stable for the near term.”

Michael Stoler, a contributing editor to The New York Sun, is a television and radio broadcaster and a senior principal at a real estate investment fund. He can be reached at mstoler@newyorkrealestatetv.com.