The weak economy has hammered many of the mom-and-pop stores that rent commercial space from Robert Phillips, whose company owns and manages property in San Diego. In some cases he has helped them through tough times by offering them as much as four free months of rent.

“The retail sector especially is really struggling, so everybody’s looking for help,” says Phillips, president and chief executive officer of Pacific Coast Commercial Asset Management.

The worst recession in decades has caused apartment landlords and other commercial property owners across the country to contend with falling rental rates and rising vacancies. They are under pressure as jobless renters buddy up and commercial tenants struggle to keep afloat. Business bankruptcies soared in the United States in 2009, and they were on track to double compared to 2008.

Owners are watching the values of their properties tank, in some cases to far below the amount they still owe. Smaller and medium-size property owners are especially vulnerable, but the big and powerful aren't immune either. In New York, developer Tishman Speyer defaulted on debt from its $5.4 billion buyout of Peter Cooper Village and Stuyvesant Town, which was the largest single-property transaction in history. The developer has lost an estimated $3 billion on the deal.

The pressure on property owners is taking a heavy toll. About 2.8 million properties were foreclosed in 2009, up 21 percent from 2008 and 120 percent from 2009, according to RealtyTrac, on online marketplace for foreclosed properties.

“This is not a good time to be an owner of a commercial property—not only has the price of the building likely gone down causing the possibility of an underwater mortgage, but tenants have been able to extract some pretty serious concessions, including free rent in some cases,” says Christopher Cornell, an economist at Moody’s Economy.com, a division of Moody's.

Moody's says its REAL Commercial Property Price Index declined by 44 percent from its peak in October 2007 to the latest reading, which was in October. That means that many owners of commercial properties of all types—office, retail, industrial, warehouse, and apartments—likely now have negative equity in their properties, Cornell said.

The problem is compounded by higher vacancies caused by business tenants going under or apartment renters sharing units to make ends meet, which has resulted in lower rental rates, said Andres Carbacho-Burgos, another economist at Moody’s Economy.com.

Apartments rates fell 4.1 percent on a national basis, and rates dropped much more in some markets, according to George Ratiu, an economist with the National Association of Realtors. For example, rates in and around New York fell as much as 15 percent in some neighborhoods, after the region was hard-hit by massive job losses on Wall Street, which reverberated through the local economy. (For a graphic showing recent vacancy rates in key U.S. cities for office, industrial, retail, and multifamily units, click here).

In San Diego, for example, rents fell by an average of 3 percent, but some parts of the region were hit much harder, says Chris Garland, an account manager with ENG Properties, which owns about a dozen apartment complexes in the area. In neighborhoods that are saturated with apartments, such as the North Park neighborhood, higher vacancies have caused rental rates to fall by as much as 10 percent over the past year.

To attract tenants for its properties, ENG Properties has had to make a number of concessions beyond lower rents. It has reduced security deposits, upgraded appliances, and replaced carpets earlier than the company had planned, Garland says. The company says its efforts have helped minimize vacancy rates at its properties. “We’re not thriving, but we’re doing better than just surviving."