If landlords are forced to sell their assets, values could plunge further, Mr Watters said: “The risk is that you start seeing disorderly sales. Given the lack of liquidity in the marketplace, that could start to upset the applecart of valuations.”
Falling commercial real estate values will expose banks to losses, S&P warned.
Lenders in Germany, the Netherlands and the Nordics will be the most exposed, analysts added, as they have particularly large books of commercial real estate loans.
S&P tracked loans issued in the four years to 2021 across major European countries, including the UK, France and Germany.
Analysts said the biggest impact will be felt in 2025 and 2026 as more loans mature.
Mr Watters said there will be an £80bn funding gap across the entire commercial real estate industry, with £34bn emerging in the office sector and £21.6bn across retail.
Alongside commercial real estate, the consumer goods and media and entertainment sectors will also be hit, S&P said.
Overall, S&P expects the corporate default rate in Europe to rise from 2.9pc to 3.75pc.
This will be the highest rate since March 2021 when defaults peaked at 6.15pc.
Excluding the pandemic period, the previous high was 5.7pc in June 2010 after the financial crisis.