The culprits, of course, are the frozen CMBS market and, more importantly, the financial crisis. Even though borrowers had been locked out of the debt markets for the better part of a year, Ratiu says, the industry had been performing relatively well – until the financial crisis hit. "That pushed us over the edge." In Q3 of 2008 only $33 billion of investment sales closed, he notes. In the same period last year, that figure was $110 billion. Deals that are getting done are being financed with cash or some form of equity.

Ratiu believes next year will be worse, with foreclosures on commercial buildings becoming more of an issue. Also, CMBS delinquencies, which have remained relatively low, will probably rise next year. "There are $400 billion of commercial loans coming due in 2009 and in an environment of low liquidity that is going to put even more pressure out there."

The report projects office vacancy rates to increase to 16.4% in Q3 of 2009 from 13.4% in Q3 of this year. Office markets with the lowest vacancies currently include New York, Honolulu and Seattle, all with vacancy rates of 9.6% or less. The highest vacancies are in Detroit, Phoenix and Dallas, with vacancies exceeding 20%.

Vacancy rates in the industrial sector are forecast to rise to 12.1% in Q3 of 2009 from 10.7% in Q3 of this year. Industrial markets with the tightest vacancies include Los Angeles, Salt Lake City and Tucson, AZ, with vacancy rates of 6.8% or less. Areas with the highest vacancies include Detroit; Stamford, CT; and Phoenix, with vacancies of at least 15%.

The retail vacancy rate is expected to reach 12.7% in Q3 of 2009, up from 9.8% in the third quarter of this year. Retail markets with the tightest vacancies include San Francisco; Orange County, CA; and Honolulu, with vacancy rates of 4.5% or less. Markets with the highest vacancies include Detroit; Columbus, OH; and Fort Worth, Texas, with vacancies of 15.6% or higher.

Multifamily vacancy rates are forecast at 5.8% in the third quarter of 2009, unchanged from the third quarter of this year. Markets with the tightest vacancies include San Diego, Northern New Jersey and Boston, with vacancy rates of 4.2% or less. Areas with the highest vacancies include Jacksonville, FL; Phoenix; and Orlando, FL, with vacancies of 8.5% or higher.