U.S. commercial property prices drop in January

The prices for U.S. commercial properties declined in January, the second straight month for the downward trend, according to Moody's Investors Service.

The Moody's/REAL Commercial Property Price index showed a 1.2 percent decrease from December 2010 to January 2011, as well as a 4.3 percent fall from the same month last year. The figure represents a 4.2 percent increase over the market's lowest point, which was recorded last August.

Despite the U.S. economy's 2.8 percent growth during the fourth quarter of 2010, which produced greater demand for office, retail and industrial space, prices still managed to fall for consecutive months.

According to Christopher Cornell, an economist for Moody's, price increases are being held back by the number of distressed properties currently on the market.

"Choppiness in the CPPI is starting to subside as the bottoming process" continues, stated Tad Philipp, Moody's director of commercial real estate research. "However, some choppiness will remain as the share of distressed transactions continues to be elevated."

Many investors had purchased properties with high levels of debt during the commerical real estate boom, which has now led to increased deliquency rates. February saw the rate reach a record-high at 9.2 percent, according to another Moody's report. 

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