While commercial real estate has not been overbuilt as much as residential housing, there are big problems in this arena ahead as well, according to a recent panel at the eighth annual Trigild Lender Conference in San Diego.

"The system is fragile, especially when you add on the lax oversight which created the situation," said Clark Rogers, senior vice president of KeyBank Real Estate Capital in Kansas City, Mo.

"Commercial real estate debt is at an historic high" and pricing will fall further as "overleveraged borrowers sell assets under duress," said Sam Chandan, chief economist and senior vice president of research for New York-based Reis Inc.

Many commercial loans "were based on inflated earnings which turned out to be too optimistic," said Bill Hoffman, president of San Diego-based Trigild.

There is just no exit strategy for these bad loans and no way to address the rising tide of delinquencies and defaults.

"Because of the difficulty in obtaining financing, more and more projects are coming out of the pipeline," said Chandan.

The bottom line? Standards are much tighter than they were in the boom, and credit markets must ease to facilitate an orderly process of deleveraging and refinancing.

"In the meantime, we will see short-term loans coming to maturity, which will be difficult, and in some cases impossible, to refinance," Hoffman added.