The commercial real-estate crisis hasn't gotten nearly as much attention as the problems in the residential housing market which literally affect people where they live.

But the widening problems in the commercial sector are expected to put even more pressure on banks as their corporate customers have difficulty repaying their loans, thus slowing down the recovery and perhaps even contribute to a dreaded double-dip recession.

So its useful to see the Huffington Post report that brings more attention to the problem which experts say hasn't yet reached bottom. They expect that to come next year.

As Christine Spolar and Lagan Sebert write for HuffPo:

Financial reports this month from federal regulators and industry analysts detail a new cycle of uncertainty that they fear could cripple the economic recovery. Billions of dollars in commercial debt will have to be paid back or refinanced at a time when property values have plummeted. About $500 billion will come due in 2010 alone and an equal amount every year through at least 2012, according to the Federal Reserve.

Many banks that cater to regional and community developments were largely unscathed by the residential mortgage meltdown. But now they are facing huge numbers of possible defaults by builders who erected thousands of office towers, condominiums and shopping centers with the easy credit available five years ago. With few tenants, those developments are turning into what industry insiders call zombie buildings.

The report is accompanied by a video featuring a Washington, D.C. developer, Jeff Neel, who gives Spolar a tour of a zombie building he built as well as other properties.

 

At the end of the video, Neel is captured saying:

"I was sad about it a year ago. I'm over it. Move on."

Unfortunately, it won't be as easy for the economy to follow his lead.

The HuffPo piece mentions a report by the Urban Land Institute called "Emerging Trends in Real Estate 2010."

The picture it paints for next year isn't for the faint-hearted:

After more than a year spent in suspended animation lagging already shattered housing markets, the commercial real estate industry hits bottom in 2010, suffering a surge of painful writedowns, defaults, and workouts. Massive government infusions finally build up loss reserves in financial institutions to levels allowing them to foreclose or strike deals with many overleveraged borrowers. In turn, banks will start to dispose of real estate owned, and government regulators will package and sell more bad loans and real estate assets acquired in takeovers of increasing numbers of failed community and regional banks. Transaction markets will begin to thaw and value declines ultimately will average more than 40 percent off mid-2007 pricing peaks. These property market reversals likely will be the worst registered since the Great Depression, eclipsing the industry debacle of the early 1990s.