Amazingly enough, the two leading indices of commercial real estate (CRE) in the US are completely at odds regarding this. Broadly based Moody's Investors Service that tracks closing prices of a broad base of CRE finds that as of the end of March average CRE prices were 47% below their peak observed in October, 2007 and still sinking, http://www.calculatedriskblog.com/2011/05/moody's-commercial-real-estate-prices.html .
OTOH, Green Street Advisors who track reported prices of a subset of CRE that is owned by 80 leading REITs find that after peaking in mid-2007, CRE declined to a low point at 60% of that level in November, 2009, when it turned around and is now at 90% of the peak level and readily rising, http://www.greenstreetadvisors.com . The data from this source has led some to even declare that the wonderful performance of the supposedly more free market CRE compared to the ongoing slump in residential real estate shows how government interventions in housing markets have been the source of all our problems, http://www.coordinationproglem.org/2011/06/recalculation-in-the-commercial-real-estate-market.html .
So, what is up? As far back as 10/27/10, Alex Finkelstein at World Property Channel discussed what was already a large divergence between these two at http://www.worldpropertychannel.com/us-markets/commercial-real-estate-1/real-estate-news-green-street-advisors-moodys-investors-service-jeung-hyun-adelante-capital-management-mike-kirby-michael-gerdes-john-maynard-keynes-3388.php . In this he interviewed the directors of research at the two outfits and got the following.
From Mike Kirby at Green Street Advisors, the optimistic firm, he got "Yes, it's subjective" in terms of their approach, which focuses on large individual transactions. Kirby went on to quote Keynes: "We would rather be roughly right rather than precisely wrong," as he supported the idea that by then CRE had already been rising for nearly a year.
From Michael Gerdes of Moody's he got "We are trying to capture the entire market, not just a subset of institutional quality assets."
A bottom line would appear to be that there is a massive divergence within commercial real estate. There are certain regions and sectors where "high quality" CRE is booming, and these are the items that stock the portfolios of the recently rising REITs. However, the larger mass of CRE in the majority of the economy is doing just the opposite and tracking the housing market, if with some lags: down and still falling with no clear bottom in sight.