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, Deutche 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 impending balloon payments. as a result, some property owners may face foreclosure.

How does this affect the luxury residential market? As you know the investors, brokers, developers, tenants (business owners), and other players in the commercial market are often potential buyers and sellers of luxury homes. Even in markets that are generally stabilizing or improving in 2010 this could mean trouble in the upper tier.