NEW YORK CITY-Based on a growing share of distressed transactions, commercial property price indexes (CPPI) declined by 4.2% earlier this year, bringing the index to its lowest level since October 2007’s peak, according to a May 2011 report prepared by Moody’s, in conjunction with Real Estate Analytics, LLC and the MIT Center For Real Estate. At the same time, the CRE market is showing some signs of life, as a recent pick-up in the volume of transactions is setting the stage for renewal, the report finds.

“The CPPI continues to bounce along the bottom as a large share of distressed transactions preclude a meaningful recovery of overall market prices at this time,” says Tad Philipp, Moody's director of CRE research, in a statement. The index is now at its lowest point post peak, 47% below its October 2007 peak. “Indeed, the post-peak low in price has been reached in the same period as a post-peak high in distressed transactions has been recorded,” he says.

In March, Moody’s says there were 182 repeat-sales transactions totaling approximately $2.5 billion this year, an increase by both count and balance over February. However, the report notes that nearly one-third of all repeat-sales transactions qualified as distressed. “Given that it may take 12 to 24 months to foreclose on a property and execute an REO sale, there is a lag effect that results in fewer distressed transactions coming to market in the early stages of a downturn and an increased level in later stages, i.e., now,” Philipp says, in a statement.