Fitch said properties were also increasingly financed with no money down or even with loans for more than 100 per cent of a property's value as owners borrowed greater amounts upfront to pay interest costs,

betting that cash flows would improve quickly enough for the property to be self-sustaining.

"Real estate professionals are structuring loans today with the expectation that cash flow will continue to rise in a commercial real estate market that has already experienced dramatic upward trends," said Eric Rothfeld, senior director at Fitch.

"Fitch is seeing the market financing the higher value prematurely, based on the expectation that it will occur, but well before it does or does not come to exist," he added.

Unlike the residential market, commercial property values are still rising. But Fitch said the recent downturn in the market for subprime residential mortgages "should caution investors about the dangers of mixing aggressive underwriting with reliance on continued price appreciation".