Commercial real estate prices were down 3.5% nationwide at the end of May, from the previous month, according to Moody’s Investors Service Commercial Property Price Index. This represents three consecutive months of negative returns and also the largest drop since December 2000, when the Moody’s index was launched.

The Moody’s index is based on apartment, industrial, office, and retail property prices in cities nationwide. It measures changes in transaction prices for commercial properties based on repeat sales of the same property. The current index reading is 8.8% below a peak reached in October 2007.

And average transaction price is falling steadily as more lower-priced assets are sold. In May, about 75% of the transactions were based on assets priced at less than $7.5 million. In the previous 12 months, only 50% of transactions were based on lower-priced assets. High price assets above $50 million represented 1% at end of May compared with 5% in May of 2007.

In another sign of reduced speculative activity, holding periods between repeat sales have become longer over the last two years. In July 2006, an investor’s average holding period for an asset was just over five years. In May 2008, the average holding period is a little over seven years.