Commercial mortgage delinquency rates, which sat at or below historic lows during most of 2007, are now inching up.

Newly released data from Oakland, Calif.-based researcher Foresight Analytics points to steady and continued increases in delinquency rates on commercial mortgages through the end of last year. Total delinquencies on commercial mortgages rose to 1.7% in the fourth quarter of 2007, up from 1.4% in the third quarter and 1.1% in the second quarter.

“The commercial mortgage sector remains much healthier than for-sale residential,” says Matthew Anderson, a partner at Foresight Analytics. “However, the recent upward trend is cause for keeping a closer eye on the market. The credit crunch and increased difficulty of getting financing will pose risks for properties in need of refinancing during 2008.”

By way of context, delinquencies in the early 1990s were in the 10%-plus range. But Anderson also points to new data on commercial loans with commercial banks, which have experienced a sharp rise in delinquencies.

According to the Federal Reserve, the delinquency rate on commercial mortgages held by the nation’s commercial banks registered 1.94% in the fourth quarter of 2007, the highest level since the fourth quarter of 2001 and up from 1.1% in the second quarter of last year.

The chorus of cautionary notes is growing louder. Just two weeks ago, New York-based Fitch Ratings revised the way it rates U.S. CMBS B-piece resecuritizations, and placed 188 tranches from 18 transactions – a total of $8.4 billion – on Rating Watch Negative.

“Recent headline defaults such as Centro and MBS support Fitch’s prediction for CMBS defaults at least doubling in 2008,” says Susan Merrick, managing director and head of Fitch’s U.S. CMBS group.

But in direct contrast to the numbers, most observers still see relatively strong property fundamentals amid the gloom. According to New York-based researcher Reis, despite slower gains in rent growth and a slightly dipping national vacancy rate in 2007, the office sector saw the strongest fundamentals since 2000. National asking rents jumped 9.6% over the year and effective rents grew 10.6%. By comparison, during the dot-bomb boom year of 2000, asking rents climbed 11.9% and effective rents were up 12.2%.

Even in California, arguably one of the largest barometers of commercial mortgage activity, the commercial loan delinquency rate was down to just 0.05% of $83.9 billion in loans. That was the fourth-lowest number reported since a 0.01% rate in the second quarter of 2002.

Still, economists with one of California’s largest financial institutions, Wells Fargo, point to Federal Reserve figures showing a 0.82% increase in commercial loan delinquencies from third-quarter 2006 to third-quarter 2007.

According to Robert White, president of New York-based Real Capital Analytics, the derivatives market may provide one of the best indicators about future delinquency and default rates. Recent pricing of the Markit CMBX, a group of indexes made up of 25 tranches of CMBS issues, implies that commercial mortgage default rates will grow to almost three times historic levels.

“We’re not in the danger zone yet,” says Anderson with Foresight Analytics. “Most of the problems are with the retail sector, and delinquency rates have definitely risen. Lenders are already a lot more cautious than they were and traditional commercial mortgage lenders have grown more cautious. There is still plenty of capital out there but it’s available at somewhat higher prices and with more restrictive terms.”

While deeper worries concern a potential recessionary environment, stimulus for commercial mortgages may be on the way. Anderson notes that as the Federal Reserve continues chopping away at the federal funds rate, it should buoy property fundamentals and stimulate more refinancing activity.