Several market benchmarks corroborate fears that a five-year run of escalating prices for commercial real estate ended in August for all but a handful of U.S. markets.

Monthly returns for a national index of commercial properties posted a negative 0.8% in September, the first monthly decline since November 2006, Standard & Poor’s reported on Dec. 18 when it released September results of its S&P/GRA Commercial Real Estate Indices. The month’s decline marked a reversal of August’s 1.1% gain and a 0.6% increase reported in July.

On a rolling 12-month basis, the national index still showed a positive 5.1% return in September. Yet that rate of return was down more than a full percentage point from summer figures, including annual returns of 6.6% in June, 6.4% in July and 6.2% in August.

“On a national scale, annual returns appear to be speeding up in their rate of deceleration,” says David Blitzer, managing director and chairman of the Index Committee at Standard & Poor’s. September results of the indices revealed “annual returns at levels not seen since early 2004,” Blitzer added.

The Pacific West defied the downward trend with an annual return of 8.8% in September, though that gain isn’t as strong as August’s figure of 9.8%. The Desert Mountain West improved from a 5.6% gain in August to a 6.1% climb on the index in September. By property sector, office remained the best performer with a 13% annual return while apartments brought up the rear among sectors with a 2.7% loss year-over-year, S&P reported.

Competing indexes published by Moody’s Investors Service tell a similar tale: The Moody’s/REAL Commercial Property Price Indices clocked a 1.2% decline in nationwide office property values in September.

Index results for October are still being processed, but sales data collected by Real Capital Analytics suggests the September value declines were the start of a trend that accelerated in the following months. Average sales prices for offices were down to approximately $225 per sq. ft. in October from about $275 per sq. ft. this past summer. The drop was most precipitous for suburban office prices, which fell to $190 per sq. ft. in November from $225 per sq. ft. in June.

From August to October, risk premiums as reflected in cap rate spreads over Treasury yield rates shot up 75 basis points to about 3.4% for suburban office properties, while spreads for central business district offices increased slightly.

Declining asset prices and climbing cap rates, along with office sales volume that plummeted 70% from a year earlier to $4.4 billion in October, meet the definition of an inflection point, Real Capital Analytics notes in a November market report. Yet the company’s researchers aren’t convinced that the September-October shift will completely end the bull market for commercial real estate. Why? Because the strong capital inflows and emergence of commercial property as a true investment asset class that brought on the multi-year expansion cycle continue to contribute to commercial real estate investment activity.

Indeed, 2008 will arrive with many unanswered questions for commercial real estate investors, according to a forecast published this month by commercial real estate services firm Colliers International. Most of the questions investors are asking revolve around the pricing and availability of debt, and deal flow will be feeble while uncertainty persists.

“Until the credit markets settle down it is highly unlikely the investment sales market will return to anything resembling normal,” explains Ross Moore, senior vice president and director of market & economic research at Colliers.

“Peering into 2008, it looks as though the first quarter, and increasingly likely the second quarter, will be very quiet with no privatizations or large portfolios trading and significantly less single asset sales,” Moore predicts. “Sellers will be reluctant to sell and buyers still highly cautious.”