A surge in foreclosures on commercial property could well constitute the next wave of the financial crisis as $700 billion of commercial-mortgage-backed securities are tested by a massive economic downturn, The Wall Street Journal reports.

According to credit rater Realpoint, these commercial-backed mortgage securities (CMBS) suffer both from bad underwriting and from the inability of property owners to refinance securities-bundled loans when these loans mature — factors that will cause problems for property owners and investors alike.

Deutsche Bank estimates that, by the end of 2012, some $153 billion in loans that make up CMBS are coming due and that commercial borrowers will have difficulty in refinancing close to $100 billion of those.

The reason? Even though the cash flows of these properties are enough to pay interest and principal on the debt, their values have fallen so far that borrowers won't be able to extend existing mortgages or replace them with new debt.

In fact, a Wall Street Journal-commissioned Realpoint study showed that 281 CMBS loans worth $6.3 billion couldn’t refinance when they matured this summer, even though 173 of the loan recipients – holding loans worth $5.1 billion – had plenty of money on hand.

The default rate on commercial mortgages held by U.S. banks more than doubled in the second quarter from a year earlier amid falling rents and occupancies for malls, office buildings and warehouses, Bloomberg reports, with loans that were 90 days past due comprising 2.88 percent of outstanding balances.