NEWARK-Borrowers take note--there is a light at the end of the long financing tunnel, so says “Deleveraging the Commercial Mortgage Market: How Much Further to Go?,” a research report issued by Prudential Real Estate Investors. But it will take a little bit longer.

By using a model calculating the ratio of commercial mortgages as a share of Gross Domestic Product, the company predicts that the commercial mortgage market will shrink by more than $200 billion for another year, bottoming out at about $2.9 trillion in late 2011, and then beginning to rise in 2012 with volumes reaching around $3.3 trillion by 2015. “The availability of debt is a critical element of the commercial real estate market,” says Jack Taylor, managing director at PREI. “Closely monitoring debt allows us to gauge the health of the market and plan a strategy accordingly. As commercial mortgage volume nears the bottom of the current cycle, we will begin to see activity pick up.”

The market rose rapidly during the last decade due to increased property values, an uptick in supply and the rise of CMBS financing. Volumes rose 127% from $1.5 trillion in the first quarter of 2000 to $3.4 trillion at its peak in the first quarter of 2009. Most of the deleveraging through this year will come from loans held by commercial banks, PREI says. “Other types of lenders are further along in the recovery process,” the report noted. “Some life companies, for example, are lending at a record pace, as mortgages are seen as a good investment relative to other products at a time of low interest rates.”