According to a Bloomberg article published today, the outlook for commercial real estate is still very bleak with values having fallen 27% thru June of this year. All indications also point to more downward pressure on rents and in turn on property values. High unemployment, lack of consumer spending and a contraction in industrial production are all factors in this meltdown in property values.
Chances for a recovery in the commercial market seem slim in the short run as the combination of falling rents, falling property values, an increasing number of maturing loans and a lack of liquidity in the credit markets all work together to drag prices down. Industrial properties seem to have taken the biggest hit as industrial production is most directly impacted by the recession.
From what I have been seeing, almost all defaults are a result of missed payments. This can be a result of owner-users losing business revenue or third party investors receiving reduced rents either as a result of not being able to rent out vacancies or tenants vacating as a result of the economy. With defaults expected to be at &5 at the end of this years, it appears that the worst is yet to come between 2010-2012 when many commercial loans begin to mature.