The tide of commercial real estate foreclosures will soon become a full blown tidal wave. One of the largest US commercial real estate lenders, Capmark Financial Group, has filed for bankruptcy. Capmark listed total debt of $21 billion and assets of $20.1 billion in its bankruptcy filing. This upset will only serve to heighten fears for the real estate market. It comes on top of the huge losses in commercial real estate reported by GE and Bank of America in their third quarter statements.

Driving down major boulevards or visiting shopping centers across America, one can clearly see the gaping storefronts of vacant retail suites. Tenants in office buildings have downsized and need less space for their disappearing workforce. They are trying to renegotiate leases, and when that’s not possible, some simply walk away to avoid paying for space they can’t use.

If commercial real estate losses continue to rise, it will put even more pressure on the FDIC’s ability to cover deposits should more banks fail. And according to a report from Creditsights,  we are only 10% of the way through this cycle of bank collapses. Their analysts forecast a total of 1,100 bank failures will occur during the period from 2008 to 2011. That means we can expect 13.4% of all US Banks to fail.

“Another wave of prolonged losses driven by weakness in commercial real estate could prove catastrophic to many of these weakened banks,” according to Creditsights.

The data behind Creditsights report shows that commercial real estate loans make up 50% of the loans of 80% of the banks that fall into the “troubled” category. The FDIC is preparing for more bank failures, and has identified more than 400 “problem institutions.” Are you prepared for the next wave of bank failures? Would you feel more prepared if you were portfolio was backed with gold?