Commercial real estate investors accumulated about $300B worth of dry powder in the early months of the coronavirus pandemic, in anticipation of bargains. So far, those deals haven't materialized as much as hoped, as sellers hold out for pre-pandemic valuations, Moody's Analytics reports.

"We believe that the ongoing uncertainty fuels a bid/ask spread that remains wide," the report notes.

"On pricing, for example, buyers and sellers of properties have significant differences of opinion on future rents, occupancies, business prospects, and ultimately expectations of net cash flow going forward. Owners prefer to value properties on pre-COVID performance," it said.

All that dry powder is waiting for at least a 30% haircut before committing to acquisitions, Moody's posits, but even owners of hotels and retail aren't ready for that yet.

"Even within those two sectors, you have high-quality assets that are still posting steady if not increasing revenue metrics," JLL Chief Economist Ryan Severino told Moody's. "It’s no surprise therefore that a large enough number of buyers and sellers have yet to come to an agreement about pricing."

Thus deal volume has fallen through the floor. The number of CRE transactions dropped precipitously during the second quarter of 2020, down 48% year-over-year and 42% compared with the first quarter of 2020, Moody's reports.

Commercial and multifamily mortgage originations contracted during the second quarter as well, down 48% by dollar volume year-over-year, with hotel-associated mortgage originations off a whopping 91%, retail off 74% and office off 71%, the Mortgage Bankers Association reports.

So far, Moody’s Commercial Property Price Index has tracked a drop in CRE prices, but not as much as after the panic of 2008, with the exception of retail property prices. Rents, both effective and asking, have also been slow to budge to downward pressure.

Owners might be out of luck when it comes to holding on to those valuations, however. Moody’s Analytics REIS predicts that rising cap rates will spur a drop in valuations of anywhere from 7% to 9% by 2022 for multifamily and industrial. Office, retail and hotel properties will be hit even harder, with valuations down as much as 20% over the next two years.