The residential property market has slowly made progress toward recovery, but the commercial real estate market isn’t off the hook. As predictions appear universally bleak, many real estate experts continue to expect a steep decline in this market.

“The last several years have seen liberal lending in the commercial market,” said Thomas Bible, broker for VIP Executive Realty in Florida. “Though not as pervasive or severe as in the residential market, this reckless lending is possibly more threatening to our economy.”

According to the Emerging Trends in Real Estate 2010 report, issued by the Urban Land Institute and PricewaterhouseCoopers, most investors will recognize massive losses in the commercial real estate market. Value declines will eventually total 40 to 50 percent of market highs, and surveys in the report indicate 2010 will be the worst time for investors to sell properties in the report’s 30-year history.

“A lackluster economic recovery characterized by problematic job growth will hamper the pace of any real estate market resurgence,” the report said.

Richard Parkus, Deutsche Bank commercial real estate analyst, believes this is just the tip of the iceberg. He predicts enormous losses and a large number of banks failing as a result of the declining commercial real estate market.

As tenants go bankrupt, downsize, or invoke their escape clauses, commercial real estate property owners have begun to feel the serious effects of the economy. By the end of 2010, the national vacancy rate is expected to reach 18.5 to 19 percent, the highest recorded since 1986.

A lack of tenants causes a lack of cash flow, and this makes it difficult for commercial property owners to make their impeding balloon loan payments. As a result, some property owners may face foreclosure. To avoid foreclosure and protect their assets against financial decline and lowered property values, some commercial real estate owners are taking a proactive approach.

“A few commercial property owners are beginning to look outside the relationship they have with their lender’s local representative, because the real decision making rarely happens at the local level,” Bible said. “They want an equitable solution that maintains the relationship, so that everyone wins.”

Guardian Solutions, a commercial loan restructuring company based in Clearwater, Florida, said it has seen notable growth in the number of real estate professionals contacting the company in hopes of helping their clients. Jeramie Concklin, CEO of the company, said property owners are increasingly feeling the stress of this down economy and can foresee only two viable options – holding on to a non-performing asset or foreclosure. However, he said knowledgeable brokers have begun to realize the benefit of loan restructuring and are pointing their clients toward reputable loan restructuring companies.

“This recovery is going to take even longer than expected,” Bible said. “The commercial real estate market follows residential by about 18 months. I recommend that property owners seek assistance early in the game rather than wait for some sort of turnaround.”

Loan restructuring involves a multi-pronged approach to turn a failing commercial property into a viable asset. This may involve negotiating a modification to the original loan, revising an owner’s business plan, reducing expenditure, revamping pricing standards for franchise fees, and legal maneuvers to protect assets. Bible said a good loan restructuring company can ease the entire process from the leasing and management of the asset, to locating the firm that will modify the debt structure.

By evaluating an owner’s asset performance and market potential, Guardian Solutions can help commercial property owners restructure their loans, according to Ira Friedman, COO for Guardian Solutions. From this information and other analytical data, Friedman said the company can create a comprehensive restructuring proposal including strategies for modifying the owner’s current mortgage with the lender.

“Armed with factual information and a realistic business plan, Guardian Solutions’ mediation staff enters negotiations with the lender to secure the most advantageous terms for the client, while addressing the concerns of the lending institutions,” Concklin said.