The industry has grappled with understanding the effects of the credit crunch since the summer. Up until now, the dominant view has been that the market would be roiled, but it would move past the problems and quite a few players would be poised to take advantage of any new uncertainty.

The common refrain is that highly leveraged buyers have stepped back and will remain on the sidelines until debt markets settle. But the removal of such players would create openings for cash-rich investors and foreign entities enjoying the benefits of the weak dollar to come right in and keep the deal volume going. The thought was that class-B and class-C assets might take a hit, but class-A properties would remain in high demand and, if anything, cap rates on these assets would fall — not rise — as buyers embarked on a traditional “flight to quality.”

This analysis stemmed from deal volumes and patterns during the second quarter — when the credit crisis had just begun. Then, cap rates registered as still falling and deal volumes looked good. And many felt that commercial real estate would not see devastating effects on par with the housing market.

We may need to scrap that worldview.

In late November, new data emerged illustrating the commercial real estate investment market has shifted to a greater degree than most of us believed. In mid November, the National Council of Real Estate Investment Fiduciaries index of properties sold showed a 2.5 percent decline on capital returns. This is the first negative quarterly price change in the index since the third quarter of 2003, when prices fell 2.4 percent.

That, in itself, was only mildly alarming. It merely seemed to prove what pros had been saying all along. Yes, the market would experience a short drop, but its effects wouldn't be that severe.

The whopper came a week later. New York City-based Real Capital Analytics revealed its numbers for October commercial real estate sales, which showed mammoth declines in sales volumes on a year-over-year basis. Office properties got hit especially hard with volume dropping 70 percent. Total volume of office properties worth $5 million or more dropped to $4.4 billion. The drop in volume on retail was only a bit less with the amount of significant retail deals dropping by 50 percent down to $2.2 billion. The outlook going forward isn't bright either with only $2 billion of retail deals reported under contract.

According to the data, large, highly leveraged buyers such as private equity firms acquired $78.5 billion in office properties from January to August (including the massive Blackstone/Equity Office Properties deal). But since then, not one acquisition has been announced.

Multifamily, meanwhile, when you strip out the $22 billion sale of Archstone-Smith, fell 50 percent.

That kind of drop is not a correction. It's the market coming to a halt. Have we underestimated how big a role debt was playing in the investment sales market? Are there that many fewer cash buyers than leveraged ones? If so, there may be some real trouble ahead. It also doesn't help matters that retail REITs — that would be likely culprits to benefit in this environment because of their low debt loads and solid fundamentals — are getting slaughtered in the stock market again. And rather than buying property, many instead have authorized plans to buy back stock.

In the end, the picture today somehow seems less clear than it did six months ago, when the credit crunch was supposed to be a fleeting phenomenon.