Commercial property investments plunged 70% last year, to $125 billion, as banks granted fewer loans and the commercial mortgage-backed securities market shut down, Jones Lang LaSalle Inc. said.

Transaction values may fall as much as 25% this year, the Chicago real estate services firm said in a report released Monday.

Potential purchasers with about $300 billion to invest in U.S. real estate are waiting for the market to improve before buying, Jones Lang said.

"The delay is coming from owners and investors who are just now coming to grips with the new realities of today's market," Earl Webb, the firm's chief executive of capital markets, wrote in the report. "As market fundamentals continue to weaken in 2009, values may continue to erode."

In the fourth quarter 87% of banks tightened lending standards for commercial real estate, according to a Federal Reserve Board survey cited by Jones Lang.

Delinquencies and defaults are likely to rise this year as a result of falling rents, Jones Lang said. Many of the loans underwritten from 2005 to 2007 contained "aggressive rent growth assumptions that will be unsupportable in 2009," the report said.

"As more owners face upcoming maturities that cannot be refinanced, an unprecedented opportunity is emerging for investors in distressed debt and CMBS," Mr. Webb wrote.

The commercial mortgage-backed securities market slumped 95% last year, to $12.1 billion, and no securities were issued after June, Jones Lang said; that contributed to a price decline of more than 30%.

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