Is commercial real estate really that bad?

With rising unemployment and falling customer spending hurting both office and retail properties, many pundits have pointed to commercial real estate as the "next shoe to drop" in this difficult economy. According to this argument, losses on commercial real estate will deal a fresh blow to real estate investment trusts (REITs) and the banking system as a contracting economy leaves offices empty and leads to defaults on the borrowings used to finance buildings. However, according to one of the largest commercial real estate holders, market conditions aren't actually that bad.

Boston Properties (BXP) -- which focuses on "Class A" office buildings -- reported favorable earnings on Tuesday, as shares have risen more than nine percent since market close on Friday. This comes on the heels of company Chairman Mortimer Zuckerman's Wall Street Journalop-ed, titled "The Economy is Even Worse Than You Think," in which he used over 1,300 words to argue that economic data underestimates the severity of the crisis and that proposed solutions will be ineffective.