The world of commercial real estate is not a pretty picture.

On Monday, downtown Los Angeles’ largest landlord, Maguire Properties, turned in to creditors the keys to seven Orange County, California, buildings with $1.06 billion in debt. In Harris County, Texas, 335 commercial properties in the Houston area were posted for foreclosure in May, June, and July, an increase of 84 percent over the last year. And in Washington, the collapse of the commercial real estate market is causing headaches for Fed chairman Ben Bernanke.

“Just to give you the scope, in the U.S. alone, we have accounted for over $115 billion in commercial property assets that are troubled,” either in default, foreclosure, or bankruptcy, says Peter Slatin of Real Capital Analytics. “So how does that affect the overall economy? I think in a big way.”

The trauma in the commercial real estate market—pain brought about by debt and exacerbated by tenant vacancies—contrasts with a slowly reemerging residential real estate market.

Tino Korologos of Deloitte Financial Advisor Services says that as banks hold onto capital to cover potential losses in commercial real estate, they won’t have the money to lend to businesses and consumers to lubricate an economic recovery. “The amount of debt…that needs to come out of the system for it to be functional again is tremendous,” he says.

What you have, Korologos and others say, is a system in which rents are falling and vacancies are rising, driving down the value of property. No one really knows how much property values have fallen, because the market for selling commercial properties is frozen.

“What I can say is we have not seen a lot of transactions…to give us comfort that…there’s not still some distress to come in real estate,” says Marc Halle, Prudential’s managing director overseeing global real estate securities and real estate retirement products.

Some of the mounting debt has been bundled up and sold as bonds (Commercial Mortgage Backed Securities or CMBS). The rest is held by banks, many of them community or regional banks.

Those banks are loath to recognize that the buildings used as collateral are now worth pennies on the dollar. They’re renegotiating loan maturities to give building owners more time to pay off debt or preparing to take over the properties and hold them until they can sell them at a higher price.

For those who run the mortgage-backed securities, says Harold Bordwin, managing director and co-group head of the real estate services team for KPMG Corporate Finance, it’s a different story. With Commercial Mortgage Backed Securities, a special servicer tries to settle the debt by converting the property to cash for the bondholders, sometimes at pennies on the dollar.

When that happens, Bordwin says, new values assigned to commercial properties are likely to be lower.

Slatin says he knows that some $60 billion has been raised by private equity and other players to buy commercial buildings as distressed assets.