Capital rates for commercial property continued to fall in the first quarter of 2009 with the United States and countries around the world hit by falling rental rates, according RICS's Global Commercial Property Survey. The quarterly survey tracks sentiment among property professionals internationally.

The United States saw capital values - an investment measure that converts rent into a capital sum - drop significantly, with U.S. real estate professionals among the most pessimistic of all respondents globally regarding the near term price outlook. Respondents expect little easing in the pace of price decline in the coming three months. Globally, the upward shift in yields has moderated across most regions, although it increased in pace in the United States.

Weaker tenant demand has led to faster rises in reported available space, which has compounded the gloom toward the rental outlook for commercial space. Rental expectations in the United States and Canada in the first quarter of 2009 are still shown to be weakening but have eased off the drop seen in the fourth quarter of 2008 by nearly half. Still, the rising available space across every region is forcing commercial real estate agents to offer increasingly larger incentive packages in order to secure a deal.

Despite the rental gloom, the rapid re-pricing in some markets may be encouraging investor interest.

"Across the United States, we're seeing lenders taking their lumps, writing down assets instead of hanging on to now outdated value expectations," said Matt Bruck, Managing Director, RICS Americas. "The survey reveals that activity in commercial space continues to be slow. Traditionally activity in commercial space lags behind trends in residential. The sentiment among property professionals in the U.S. is that even if we're near the bottom, the recovery over the next two years will be minimal. Some of our members are saying that local investment is starting to move as local and regional banks were less dramatically affected by the global crisis."