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October 9, 2009 (LPAC)—More evidence of the blow-out of the commercial real estate market is emerging by the day. According to the real estate research company Reis, Inc., vacancies at U.S. shopping centers rose in the third quarter to a 17-year high. Vacancies at neighborhood and community shopping centers increased to 10.3% from 8.4% a year earlier. Vacancies at regional and super-regional malls rose to 8.6% from 6.6% a year earlier. Occupied space at neighborhood and community shopping centers dropped by 5.3 million square feet in the third quarter, while developers added less than 600,000 square feet that went empty.

The LA Times reports that more California hotels are being pushed into foreclosure. Statewide, more than 300 hotels were in foreclosure or default on their loans as of Sept. 30, nearly a five-fold increase since the start of the year. Most struggling hotels remain open, but industry experts believe many properties are likely to be closed down in the months ahead. The owners of the Quail Lodge Resort and Golf Club in Carmel, California plan to close the hotel Nov. 16. In Southern California alone, there were at least 140 hotels in default or foreclosure in September, including 55 hotels in the Inland Empire, 33 in Los Angeles County and 30 in San Diego County, according to the report by Atlas Hospitality Group. Statewide, 260 hotels were in default on their loans, and 47 had been taken over by their lenders in foreclosure.

Many resort operators owe more than their properties are worth as a result of the collapse of the commercial real estate market. As opposed to home loans, mortgages on larger hotels typically are supposed to be repaid in full after five to 10 years. Many of them are now coming due. But more and more hotels have so little revenue that they can't even afford to pay their operating bills and payroll, let alone service their debt. Owners of such hotels are increasingly handing the keys back to the lenders. UC Berkeley economist Kenneth Rosen said as many as 1 in 5 U.S. hotel loans may default through 2010.