During the real estate boom, commercial real estate looked like as good an investment as any. But since the bubble burst on residential real estate, many predict commercial property will follow.

One Dayton-area broker said the next three years will be a struggle for most owners to survive.

Jeff Levine, principal/vice president with the Dayton office of Colliers Turley Martin Tucker, said nationally, $1 trillion worth of commercial property will need to be re-financed over the next three years. During the boom years of real estate, deals were financed with non-traditional lending, such as commercial mortgage-backed securities. When property was bought at the height of its value, the notes were scheduled to balloon at three, five or seven years. This didn’t worry investors at the time, because they thought prices were only going to climb.

With all of these mortgages coming due for huge dollar amounts and properties having lost value, Levine said lenders won’t be able to handle the demand.

“There’s just not enough capital to do it,” Levine said.

As far as the Dayton market is concerned, Levine said he would be speculating if he tried to put a number on at-risk properties.

But one company has an estimate on Dayton’s current exposure. There are six commercial real estate properties in the Dayton area that are troubled, according to Real Capital Analytics Inc., a global research and consulting firm with offices in New York City. The distressed value of the six properties is $126 million. This number only includes office, industrial and retail properties, not developments, hotels or apartments.

The properties listed by Real Capital Analytics include Kettering Tower, One Elizabeth Place and 111 West Liberty St.

In Ohio, there are 108 properties with a value of nearly $1.8 billion that are troubled. Nationally, Real Capital Analytics lists 2,784 properties in trouble, with a value of more than $56 billion.

But what does that mean?

In the short-term, Levine said this means it will be difficult to make deals in properties that may go back to the lender, unless landing that tenant would mean rescuing the property.

Once a property goes back to the lender, Levine said the sole motivation for that lender is to get the property off its books. If a building merits investment and the lender has money to put into the property, it would be in the lender’s best interest to make the improvements so the building to can create or strengthen its revenue stream.

“I think the longer term is going to be better than the shorter term,” he said.

Because many of these deals used commercial mortgage-backed securities, when it comes to re-writing the loan documents, it can’t be done because one property may be owned in part by thousands of investors. There’s no one person to see about re-working the deal.

Nationally, the default rate for commercial real estate mortgages held by regulated depository institutions increased to 2.25 percent during the first quarter of this year, compared to 1.62 percent in the fourth quarter of 2008, according to New York City-based Real Estate Econometrics, a commercial real estate industry analyst group. The default rate is expected to rise to 4.1 percent in the fourth quarter.

Mark Fornes, owner of Centerville-based Mark Fornes Realty Inc., said many lenders are being patient and using forbearance agreements. Forbearance postpones the borrower’s monthly payments for a period of time.

But it doesn’t solve the underlying problem.

Dave Dickerson, president of Gem Real Estate Group, said it may take the government stepping in to deal with this coming wave.

“It’s the big elephant in the room. It has to be dealt with,” he said.

Levine said there is a Troubled Asset Relief Program provision that uses Term Asset-Backed Securities Loan Facility, or TALF, funding to help lenders that hold some of the debt connected to these properties. He said lenders will be able to borrow money from the government so they can stretch out the due dates of these loans.

“Over time, the good properties will work themselves out,” Levine said.

Fortunately for Dayton, lenders weren’t as active in this market. Unlike areas that saw huge increases in property values, like the East and West coasts, Dayton doesn’t have the same level of exposure because that type of financing usually chased bigger deals in larger markets.

Dickerson said it’s hard to guess what Dayton’s overall exposure will be. He said the area has seen an uptick in commercial foreclosures, but is surprised it hasn’t seen more.