The downturn in the commercial real estate sector is beginning to hit retail properties in secondary markets, with the New York Times reporting on May 7 that the Lightstone Group, a Lakewood, N.J.-based real estate owner, is nearing credit defaults on two enclosed malls it bought in 2005.

The properties, which include the 1.4-million-square-foot Macon Mall in Macon, Ga., and the 415,033-square-foot Burlington Square Mall in Burlington, N.C., have been losing anchors to nearby lifestyle centers, and occupancy levels at both properties has dipped below 75 percent. JCPenney and Belk left Burlington Square Mall to join nearby Alamance Crossing, an 840,000-square-foot lifestyle center, leaving the mall with just one anchor, Sears, which itself has a lease expiring July 2009.

One of Macon's anchors, Parisian, broke its lease ahead of schedule last year, when the chain was bought by Belk. This year, the mall faces increased competition from the Shoppes at River Crossing, a 750,000-square-foot lifestyle center that opened in the area in March 2008.

As a result, the Macon & Burlington Mall pool loan, which totals approximately $139.7 million, was turned over to a special servicer in March, with Moody's Investors Service expecting a significant loss on the properties.

Lightstone declined to comment.

As the year progresses, stories like Lightstone's could become more common in the retail real estate world. The total delinquency rate for commercial mortgages in the U.S. reached 1.8 percent in the first quarter of 2008, according to Foresight Analytics, an Oakland, Calif.-based real estate consultancy. That's still historically low, but it is a 60-basis-point increase from the first quarter 2007.