Commercial delinquency rates are likely to rise above 3.5 percent by the end of the year, and may reach up to 6% in 2010, thanks to rising vacancies, falling rents, and a general lack of money. Lower occupancy and rental rates make it harder for landlords to pay their debt, forcing some to foreclose. Furthermore, higher underwriting standards, declining income, and lower property values make it difficult for even willing owners to refinance their loans as they come due. Numerous small office buildings have already fallen into default in San Francisco, a warning sign of impending defaults from bigger property owners.
Re: “Commercial real estate market softens”, from San Francisco Gate