NEW YORK - December 31, 2009 - Reports that commercial real estate (CRE) is suffering from a double whammy of soaring vacancies and declining valuations have been making news recently with sobering regularity.

Daily Finance addressed the risks that CRE meltdowns pose to banks in early December; and in a stunning confirmation, just weeks later, Morgan Stanley announced it was "walking away" from five San Francisco office towers, giving them back to the lenders. These accounts address the impacts on real estate investors, banks and hard-hit locales such as southern Kalifornia. But a bigger, often-overlooked risk is the potential for CRE to remain a drag on the U.S. economy for years to come, or its potential to trigger a slide into a deeper Depression - the so-called double dip that many fear.

Four primary factors are behind the tumble in CRE prices - and they're eerily similar to those that powered the residential housing boom and bust:
 

• Overbuilding in marginal locales that lacked adequate jobs and services to support massive new commercial construction (malls, hotels, business parks, resorts, etc.)
• Excessive valuations fueled by low interest rates and easy credit
• Highly leveraged bets on future appreciation
• A banking sector that's extremely vulnerable to write-downs and losses from foreclosures