By Edward K. Elanjian

The pending crisis in the commercial real estate market and its striking similarities to the fallout we’re experiencing from the boom and bust of the residential market illustrates one of the more famous Yogi Berra-isms:

"It's like déjà vu all over again."

Still, there are some who argue that what’s happening in the commercial market is a “black swan” event – a rare, unexpected occurrence that couldn’t possibly have been predicted by even the most sophisticated economic modeling.

This argument, of course, begs the question: Can you really have a black swan event twice in two years?

Let’s take a look at how we got here.

As shrinking revenue streams continue to force business tenants to scale back or completely move out of leased commercial space in this down economy, building owners are scrambling to find the income necessary to make mortgage payments on their commercial buildings.

To make matters worse, $1.4 trillion of commercial loans are due for refinancing in the next five years—more than $178 billion of which are coming due in 2009 alone. This is the biggest surge of refinancing demands ever to hit this market. Not surprisingly, a surge of defaults could be on the horizon.

The root of the problem is a matter of supply and demand: The amount of loan maturing far exceeds what new bank lending has been able to absorb. The inevitable result of this scenario is oversupply, which will inevitably drive down real estate prices and delay any plans for new commercial development. As lending standards tighten to a slow trickle, many commercial real estate owners may be forced to allow their properties to go into bankruptcy. Even building owners in a strong position to refinance will be hard-pressed to find a bank willing to originate a loan on a property that has significantly dropped in value in such a short amount of time.

Adding to the downward spiral is the complete absence of the CMBS market, which financed a huge number of commercial buildings. According to research firm Dealogic, there has been no U.S. issuance of CMBS this year. Just two years ago, bond issuers sold more than $221 billion in these types of securities. A reversal of fortune, to put it mildly.

The good news is that there is a tremendous buying opportunity in the commercial market for those who have been prudent in managing their cash. As every good developer knows, the time to buy real estate is when most wouldn’t dare touch it.

Existing developments are trading at 20-year lows, allowing many buyers to realize as much as 25 percent returns on commercial properties.

While many view investing in commercial real estate as a risk too great to take on in a down market (as it involves taking on a significant chunk of debt), it’s an investment that may offer smart investors a hefty reward in the long run. There is still an opportunity for long-term capital gains, as well as the potential for income to rise over time, ahead of inflation.

Whether the pending decline of the commercial real estate market was a black swan or could have easily been predicted, the fact of the matter is that we’re at the brink of a vicious cycle. The good news is that when national economy improves—which many economists predict to happen in 2010—the commercial real estate market will improve as well.