We all know commercial property prices are tanking, thanks to reduced occupancy/revenue and a completely cruddy financing landscape. That said, I think it's important to look inside the numbers and see what is the best and worst in show, so we can determine where to invest.

A new report out today does just that.

The Moody's/REAL Commercial Property Price Indices give an excellent breakdown of what's doing what.

The price index is down 7.6 percent in May from April, down 28.5 percent from May 2008 and down 34.8 percent from the October 2007 peak. Breaking it down, on a year over year basis, prices in the apartment sector are down 16.1 percent, Industrial down 12.3 percent, Office down 28.8 percent and Retail down 18.5 percent. Office and retail are obviously taking the brunt of the recession and its job losses.

Transaction volume in the overall market has fallen to its lowest level yet.

There were 282 transactions in May and of those, 52 were repeat-sales transactions used in calculating the Moody's/REAL index.

"The dollar value of sales was less than April 2009, the former lowest amount, with total sales dropping to $2.7 billion," according tot he report.

So what's the takeaway?

Distressed sales are almost certainly starting to exert downward pressure on the returns. In addition, mortgage interest rates have increased recently, which appears to have derailed or postponed some deal closings. The apartment sector felt the brunt of this effect, causing volume in this sector to decline more than for any other property type in the month of May.

REAL's president, Neal Elkin, says in the press release:

We cannot underestimate the enormity of what the data has represented in the past two months. The fact that this month's price decline is less than last month's price decline might be seen as a positive sign in some circles. It could suggest that bottom in prices may be starting to form, however, we need to see higher transaction dollar and deal volume in order to draw more definitive conclusions.

Questions?  Comments?