Cracks appearing in U.S. commercial real estate market

[Dover]

NEW YORK: As the value of U.S. home mortgages crumbles by the day, Wall Street has hoped that commercial real estate loans would stay clear of the storm.

But bankers believe the headwinds may be shifting after a large apartment complex in the Harlem area in New York warned last week that it might not be able to make good on a $225 million mortgage payment by September.

A default by the complex, the rent-regulated Riverton Apartments, a 12-building residential development constructed after World War II, would be New York's largest in the current housing crisis.

For Wall Street banks, which hold about $100 billion of commercial mortgage-backed securities, the prospect has fanned new worries that a deterioration of the overall commercial property market could trigger more write-downs in the coming quarter, on top of losses already expected from their distressed mortgage securities holdings.

"The fear is the next shoe to drop may be commercial real estate," said Jeffrey Harte, a banking analyst at Sandler O'Neil. "When consumer credit goes south, commercial will follow."..>

http://www.iht.com/articles/2008/08/22/business/commercial.php

[Sanity Claws]

1. It's an apartment building

That's impacting the housing market.
I don't understand why this is discussed in terms of commercial property, which I consider office buildings and the like.

[Warpy]

2. Same here, the connection is a little vague

However, true commercial real estate is going to be affected by the general slump as the consumer market continues to conform to lowered expectations and then dry up.