Commercial Real-Estate Loans Begin to Sour

Once a bright spot, commercial paper is looking grim
By Jim O'Neill,  Newser User
Posted Jan 8, 2009 10:55 AM CST
Commercial real estate loans are souring at an increasing pace.   (AP Photo/Kathy Willens)
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(Newser) – Commercial real estate is beginning to feel the same pinch as the housing market, with delinquency rates rising in the fourth quarter and forecasts that they could reach the highest point in more than a decade by the end of 2009, reports the Wall Street Journal. Both individual mortgages held by banks and thrifts and bonds comprised of packaged mortgages have soured.

The $3.4 trillion commercial-mortgage industry—from apartment buildings to office space and shopping malls—is less than a third the size the $11.2 trillion residential-mortgage market, and had been thought to be less vulnerable to the downturn. But it's beginning to show the same signs of a speculative bubble bursting, as newer deals are souring at a faster rate than older ones, suggesting investors paid too much, and lending standards were too lax, at the height.