The amount of distressed commercial mortgages in bonds may double this year, to $60 billion, according to Credit Suisse Group AG.
The pipeline of distressed loans, which includes properties that are 90 days past due on payment, in foreclosure or already seized, currently totals $28.8 billion, Credit Suisse analysts led by Gail Lee said in a report Monday.
Troubled loans had an average monthly increase of $2.7 billion in the fourth quarter, compared with $1.4 billion in the first quarter of 2009, according to the New York-based analysts. The distressed pipeline, currently 2,601 loans, may take several years to resolve, they said.
Special servicers, the companies that handle problem loans which have been securitized, have typically resolved no more than 472 loans in one year, according to Credit Suisse.
Also, Moody's Investors Service Inc. said U.S. commercial property values had their biggest monthly rise on record in December as the number of transactions jumped.
The Moody's/REAL Commercial Property Price Index climbed 4.1% from November, the second straight monthly gain, the rating agency said.
Transaction volume rose more than 75% from the previous month.
Values, which fell to a seven-year low in October, were down 29% from a year earlier and 41% from the peak in October 2007.
"Two months of positive returns and one month of higher transaction volume does not allow us to discern a trend just yet," the report said, "particularly in light of the fact that yearend commercial real estate activity can distort the true condition of the markets."
Landlords came under pressure in 2009 as rising joblessness cut demand for apartments, offices, retail space and distribution centers.
Office vacancies jumped to a 15-year high of 17% in the fourth quarter, according to Reis Inc.
Though the period of "large" price declines has ended, it is too early to say the market has bottomed, Moody's said.
"It would be naïve and aggressive to say that we've seen the worst," said Neal Elkin, the president of Real Estate Analytics LLC, a real estate research firm in New York that supplies the data for the Moody's/REAL price index.
The monthly growth in the index was the biggest reported in data going back to January 2000, Elkin said.
December saw 716 transactions, totaling $9 billion.
The month was the first in 2009 in which the year-over-year dollar volume comparison was positive, at just under 5%, Moody's said.
The dollar value was up more than 100% from November.
Building sales typically rise in December as buyers and sellers close deals before yearend.