Real estate analyst Lisa Pendergast of RBS Greenwich Capital Markets says rising interest rates can have a direct impact on owners of commercial sites, eroding property values.

Douglas Healey / The Associated Press

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NEW YORK — While banks and other lenders may fret these days about consumers' ability to repay home mortgages as interest rates rise, they have another concern: the commercial real estate market.

Investors and lenders are looking more closely at the loans they make for properties such as malls and office buildings and wondering whether some borrowers might default because of rising rates that in some cases can erode property values.

There isn't a crisis yet in commercial lending — there haven't been reports of an unusual number of failed mortgages. But the industry is uneasy because of the huge amount of lending during the years-long real estate boom, and because it's hard to anticipate which loans will sour.

"We are being more aggressive and the impact of that aggressive lending is unknown given that we don't know how quickly and to what extent rates will back up and how fast property values will decline," said Lisa Pendergast, real estate analyst at RBS Greenwich Capital Markets. She added: "Usually, when rates back up, property values tend to decline as well."

Commercial borrowers are vulnerable to higher rates because they tend to refinance rather than pay off their real estate loans, and in an environment in which rates are rising, new loans become more expensive or harder to get. Moreover, if a commercial property has lost value, a lender may require the borrower to put up more money for a new loan.

The size of commercial loans — they can range from $1 million to $900 million — make them harder to pay off. So many borrowers as a matter of course take out five-year or seven-year loans and pay them back by refinancing with new mortgages.

The increase in interest rates for some borrowers could not come at a worse time. Fixed costs are up for everything from insuring a building and repairing it to heating it. And these costs can't all be passed on to tenants in the form of higher rent.

"Your expenses will rise as well in a rising interest rate environment," Pendergast said.

Lenders are not the only ones worried. Many of the loans are resold on Wall Street as securities to investors including insurers, pension funds and mutual funds which, in effect, become lenders.

Jeff Given, portfolio manager at John Hancock Funds, which invests in securities that pool commercial real estate loans, agreed: "It is something investors are keeping in the back of their minds."

Last year, investors bought $169 billion of securities backed by commercial property mortgages, according to Roger Lehman, real estate analyst at Merrill Lynch & Co. Pendergast estimates that about $550 billion worth of securities backed by commercial real estate loans are held in portfolios of investors like insurers and mutual funds.

There are "definitely some credit concerns regarding the increased leverage we are seeing in loans," said Larry Kay, a director at Standard & Poor's, which tracks securities pooling the property loans.

"I don't think it will be a test in the near-term because of the abundance of capital and the current attractiveness of real estate as an investment, but longer term we do have credit concerns."