by Calculated Risk on 7/31/2008 09:09:00 PM

From the Financial Times: Real estate sector fears huge increase in CMBS defaults (hat tip Raymond)

Defaults on [recent] commercial mortgage-backed securities ... will more than quadruple from their current levels under conditions in the US economy expected by the commercial real estate industry, according to a report from Fitch Ratings.
...
Borrowers would default on an average of 17.2 per cent of securitised commercial mortgages over 10 years if the US economy dips into a recession ... compared with current very low default rates of 4 per cent ...

[The problem is] inflated property values and weaker underwriting standards. .. in 2006 and 2007, as well as the weaker economy. Those bonds make up about 49 per cent of the outstanding CMBS market of more than $800bn.

Higher defaults and lower property values is one side of the commercial real estate (CRE) bust; this is the impact on existing CRE.

As discussed this morning, the CRE bust will also result in less new investment in non-residential structures, especially hotels, malls and office buildings (since those were the most overbuilt).