A new industry analysis today shows that the default rate on U.S. commercial real estate loans jumped to the highest level in 16 years.

As the Investigative Fund reported last week, the problems in commercial real estate are threatening hundreds of small and medium-sized banks because the oversupply means developers can’t fill their “zombie” buildings and pay back their loans.

Real Estate Econometrics, a private firm that specializes in investment, lending and risk management analysis, crunched the numbers from regulated lenders that submit reports to the Federal Deposit Insurance Corporation. It reports that the delinquent and default mortgages increased 14 percent in the last quarter from $44.1 billion to $50.3 billion.

The national default rate jumped from 2.88 per cent in the second quarter to 3.4 per cent in the third quarter. That’s the third largest one-quarter increase since quarterly data became available in 2003.

Things don’t look much better in the near future. The report forecasts that the default rate will rise to 5.2 per cent by the end of 2010 and peak at 5.3 per cent in 2011.