U.S. commercial property prices hit new cycle low

NEW YORK, Feb 5 (Reuters) - U.S. commercial real estate prices fell 4.9 percent in the fourth quarter, setting a new low for the current downturn, according to a leading property index released on Friday.

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The slide to 139.25 points wiped out a 4 percent rise recorded in the third quarter and takes the index -- by the MIT Center for Real Estate (MIT/CRE) -- below 140.06, the cycle's previous low reached in the second quarter.

For the year, the index, which includes prices for commercial property sold by major institutional investors, is down 22.5 percent since the end of 2008. At the end of the 2009, the index was 39.5 percent below the second quarter 2007 peak of 230.26.

"It is a bit disappointing that we couldn't put together two back-to-back positive quarters, but in the big picture, I regard the index as suggesting that the market has essentially flattened out since the end of the first half of the year, which is a lot better than continuing the drastic fall that had happened the previous year," David Geltner, director of research at MIT/CRE, said in a statement.

MIT/CRE publishes not only the price index based on closed deals, but also compiles indexes that separately gauge movements on the demand side and the supply side of the institutional property market.

The demand-side index tracks the changes in prices that potential buyers are willing to pay. That index fell for eight continuous quarters from mid-2007 to mid-2009, to 48 percent below its peak of 253.87. It rebounded 12 percent in the third quarter. But succumbed to the negative side in the fourth quarter, down 4.5 percent to 44 percent below its peak.

The supply-side index, which gauges the prices property owners are willing to accept, also fell in the fourth quarter, down 5.3 percent, to 35.5 percent below its peak in first quarter of 2008 of 212.84.

"There remains a gap in pricing perception between the two sides of the market, which is keeping trading volume low by historical standards," said MIT/CRE research technician Holly Horrigan. (Reporting by Ilaina Jonas; editing by Andre Grenon)