Retail and office buildings in the nation's capital are at risk, and so are smaller community banks holding higher proportions of commercial loans on such properties, The Washington Post reported Friday.
The Washington area trails only South Florida and metropolitan New York in the value of commercial properties in foreclosure, research group Real Capital Analytics reported.
Nearly 3,000 community banks -- 40 percent of the banking system -- have a large proportion of commercial real estate loans relative to capital, said Elizabeth Warren, chairwoman of the Congressional Oversight Panel monitoring the financial bailout.
"There's been an enormous bubble in commercial real estate, and it has to come down," Warren said. "There will be significant bankruptcies among developers and significant failures among community banks."
A failure on that scale could "throw sand into the gears of economic recovery," she added.