Texas' commercial real estate market steadily worsened as recession took hold in 2009. Commercial real estate's woes don't bode well for banks already struggling with losses from residential loans. The number of distressed properties--those in foreclosure, in bankruptcy or restructured--is rising.

U.S. financial woes are taking a toll on commercial real estate> investment in Texas. Uncertainty is prevalent among buyers and> sellers of office, industrial, retail and apartment properties,> and property sales are likely to remain subdued in the near term.

Every segment of the Texas commercial property sector suffered during the recession of 2009. Demand withered for space in offices, warehouses and retail centers, pushing up vacancy rates and lowering rental rates. Private nonresidential construction dropped sharply, reaching near-record lows....