Commercial real estate borrowers are running out of options as asset-backed markets dry up and alternative financing comes to an "abrupt halt," analysts at RBS Greenwich Capital Markets Inc. said.

Regional banks and insurance companies, which had become the primary source of financing since credit markets seized up, have stopped lending, the RBS analysts wrote in a report issued last week. Sales of bonds backed by commercial mortgages have slumped to $12.2 billion in 2008, compared with a record $237 billion last year, according to JPMorgan Chase & Co.

The government's attempts to unlock credit markets is easing some borrowing costs in some markets but will not relieve the seizure in the commercial mortgage debt market, according to the RBS analysts, led by Lisa Pendergast in Greenwich, Conn. "The de-thawing of the shorter-term lending markets is a welcomed first step," the analysts wrote. "However, it is a baby step and will have little effect on commercial real estate lending near term."

Both regional banks and insurers are reigning in lending, Ms. Pendergast said. The insurance industry is under review by ratings companies and may be downgraded, while not yet receiving permission to participate in the Treasury's capital injection programs, she said, and regional banks remain "under significant pressure."

The dearth of financing options will make it challenging for borrowers with loans coming due in 2009. About $88 billion in commercial real estate loans will mature next year, RBS estimates. RBS Greenwich Capital is a unit of Royal Bank of Scotland Group PLC.

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