Commercial office building construction is expected to slack off in 1986, industry analysts say, as disappointing long-term returns on investments in markets glutted with office buildings begin to sour investors' dreams.

Lenders, who helped create the boom through their willingness to make funds available, are pulling back and becoming more cautious about investing in commercial real estate, experts say.

At the same time, savings and loans, which accounted for much of the increase in lending for construction of commercial office buildings during the recent boom, are facing increasingly tighter regulatory controls that will curtail their investing activity.

"In essence, 1986 will be a transitional year as the industry winds down the longest commercial building cycle in memory," said Leanne Lachman, president of Chicago-based Real Estate Research Corp.

"The oversupply situation is so obvious now that no one can ignore it. If the lenders continue to lend like that, they will look like absolute fools," she said. "Developers will still be active -- completing projects started in '84 and '85 and leasing newer buildings -- but relatively few projects will break ground in 1986."

Lachman, who annually interviews leading real estate analysts about the coming year, said that, while construction of new office space will drop in 1986, money will still be readily accessible for other commercial real estate investments.

As real estate is still considered a solid investment, she added, investors are now beginning to buy existing office buildings for their portfolios.

Over the past three years, the construction of commercial office space has ballooned, despite clear indications many months ago that supply had exceeded demand -- in large part because lenders were willing to make funds available despite growing vacancy rates.

The national vacancy rate is now running above 15 percent, and in some cities is as high as 25 percent. The see-through building in which no occupants obstruct the view, once an industry joke, has become a national embarrassment, and industry experts say the oversupply of office space contributed to the pressure for tax reform of the real estate industry.

What really fueled the construction boom, say the experts, has been the enormous amount of capital, both domestic and foreign, seeking the relative security of real estate investments as a hedge against future inflation.

"There is still a tremendous amount of capital here in the United States chasing after too few deals," said Howard L. Flax, senior vice president and manager of the D.C. regional office of the Abacus Group, a real estate investment company. "The issue now is whether or not the returns investors are getting will be satisfactory in the future. I think not."

In addition to the willingness of lenders to put money into commercial construction, changes in the tax code that went into effect in the early 1980s attracted many institutional and private investors who had not previously invested in real estate, and helped accelerate the building spree.

Anthony Downs, a Brookings Institution fellow, recently released a study of the changes in real estate finance over the past decade that showed that deregulation of the thrift industry, paired with federal policies that benefit financial investment in real estate, were responsible for a shift in capital investment away from housing and into commercial real estate, especially since 1983.

While the tax-reform measure passed by the House of Representatives and now pending before the Senate has added to investors' concerns about the future of real estate by raising the prospect that some of the tax advantages for real estate investment will be stripped away, analysts say it is the long-term loss from depressed rental rates that has accounted for the current retrenching among lenders.

Even so, Downs said that many large institutional investors have continued to make loans for construction projects in areas with office gluts because there are few alternatives.

As an example, Downs said that one bank recently made a loan for construction of a 1 million-square-foot building in downtown Houston, despite a whopping office vacancy rate of 24 percent in that city.

Downs said that when the lending officer was asked why he approved such an irrational loan, he responded by saying that the only alternative was lending the money to Argentina.

"If they had really been concerned about supply and demand they would have stopped lending money for office buildings two or three years ago," Lachman said.

"For the most part, the investments have not appeared to be that risky over the short-term, so there was no reason not to go through with them," she said.

Lachman said that many of the institutional investors were joint venturers with developers in deals that would give the institution the developer's share of the building if it did not lease within a certain period. As a result, those investors were more willing to invest in a time of oversupply of office space.

The developers, she said, were willing to do such projects because most of them were getting high fees. If the building didn't lease right away, the developer would take his fee, give up his interest in the project and go start another building down the street.

According to Lachman, "it was a very clever little construction that didn't cost anyone in the short-run." The short-run, however, appears to be over, she said.

One commercial broker in the Washington area said that a developer told him recently he had named one of his buildings Fifi, or rather, Feefee, because that was what he was getting out of the project.

"If a developer can finance out his share of a project, he will build an office building in the middle of a desert," Downs said. "He doesn't care if there aren't any tenants around to move into it."

Continued high vacancy rates have depressed office rental rates in all buildings in markets with an oversupply, lowering the returns investors were expecting and tarnishing the glamour of office construction nationwide.

Median commercial real estate yields, which measure the value of anticipated appreciation of the project and annual cash flow, began to tail off last year and are expected to continue to drop into 1986.

"Lenders in the past have been very liberal in their underwriting procedures," said Flax. "Given the overbuilding in some markets, lenders are becoming much more conservative and less likely to make aggressive loans for next 18-24 months. In some markets that are terribly overbuilt, such as Denver and Houston, lenders have closed their offices and moved out of the area."

Existing office buildings with established tenants are now becoming attractive investments, while new office buildings without tenants could be good investments if purchased at discounts, the experts said.

Industrial and retail development, which have always been more closely bound by the laws of supply and demand for various reasons, are also seen as good real estate investments in the new year.

Flax cautioned, however, against syndication investments, saying that syndicators are one group that have not rewritten investment projections to reflect depressed rental rates.

"Syndicators are continuing to project income streams that are, in my estimation, over-optimistic," Flax said. "They continue to sell them because people think it is sexy to be able to say they have invested in a limited partnership where in 90 percent of the cases they do not even know what they have bought."