Drop in Commercial Property Values Stalls Rebound

U.S. commercial real estate values fell in March, pushed lower by a quarterly drop in retail and office properties in the biggest metropolitan areas, according to the most recent report from Moody's Investors Service, Inc.

The Moody's/REAL Commercial Property Price Index fell 0.5 percent from February, the second straight monthly decline. Prices slid 25 percent from a year earlier and are down 42 percent from the October 2007 peak. Moody's economists see this as continued bad news for owners because it shows a trend of basically flat prices.

Economic growth in the second half of 2009 and first quarter of 2010 helped lift prices for offices, warehouses, and stores from lows set in October. Property sales jumped 50 percent in the first quarter from a year earlier, to $15.4 billion, according to the report. But the rental market has lagged behind, with owners struggling to fill empty space and raise rents. U.S. office vacancies rose to 17 percent in the first quarter, the highest level since 1994, while asking rents fell 0.8 percent, according to New York-based research company Reis, Inc.