The Moody’s/REAL commercial property price index (CPPI) shows that prices have dropped 16.4% from a year ago. However, property prices have rebounded 4.7% since October 2009.

In April 2010, prices rose 1.7% after two consecutive months of slight price decline.
But commercial property prices remain well below the market peak of October 2007. The index shows that the prices are 41.1% below peak levels.

“The big picture is still that of an essentially flat market, with perhaps a slight upward trend on average and some bouncing around from month to month,” says Neal Elkin, president of Real Estate Analytics (REAL), which publishes the index along with Moody’s.

The index prices measure 113.10 for June 2010, compared with 107.98 in October 2009.

The past two quarters have seen choppy results, which included three months of positive price gains at the end of 2009 and early 2010, negative results in February and March, and the positive result again in April.

The proportion of ‘troubled asset’ sales in the CPPI increased slightly from 25% in March to 29% in April. “In spite of this, the overall CPPI advanced in April due to the very strong performance of ‘healthy’ properties,” says Elkin.

The three major office markets that the CPPI tallies, New York, San Francisco and Washington, D.C., all experienced value declines surpassing that of the national office market. However, all three markets outperformed their respective regions. San Francisco performed the best of the three with a one-year price decline of 10.7%, slightly better than the 11.4% drop for the Western region office market as a whole.

The report says that transaction volume is still very low and without higher volumes it is difficult to conclude that prices have stabilized. The market could bump along for several quarters as weakening fundamentals for some property types and the speculation of interest rate increases in the future conspire to hold down values.