US commercial property values have fallen by -21.3% over the first three quarters of 2009, according to the IPD US Quarterly Indicator.

While the rate of market decline slowed for the third consecutive quarter, capital return at -5.2% over Q3 stands in sharp contrast to the US’s wider economy which technically emerged from its recession posting an annual growth rate in GDP of +2.8% over Q3.

The steepest declines over the third quarter and the year to date have been seen in the Office and Industrial sectors, falling by -23.1% and -23.0% respectively over the year to date.

The IPD US Quarterly Indicator monitors the trends in underlying market value and performance of $79.8bn of assets held by the leading real estate fund managers in the US. Its methodology ensures that only assets revalued by the end of each quarter are included. This ensures that price movements over each quarter are accurately reflected in headline all property, sector and segment level, which is acutely important in rapidly declining markets.

Simon Fairchild, managing director for North America of the London-based property index firm IPD, said: “Just as the world’s largest economy emerged from its most severe economic crisis since the Great Depression, US real estate market values continue to deteriorate. We are heading for the worst annual capital and total returns on record.”

Fairchild added: “Most of the market is expecting a peak-to-trough 40% decline, which would bring the US close to the world’s worst affected real estate markets, the UK and Ireland, which peak-to-trough declined -44.2% and -53.0%, respectively.”

Geoffrey Dohrmann founding president and CEO at Institutional Real Estate, added:“Everyone is worried about a W-style recession in the US, particularly because of the withdrawal of the financial stimulus package.”

At an investment level, US real estate has underperformed all major asset classes over the year to date with a total return of -17.4%, compared with equities which have recovered after a poor first quarter to deliver +19.3% over the nine months to September 2009. After a -31.9% tumble in property shares total returns over the first quarter, the asset class has made a dramatic recovery in the third quarter to end the period +17.0%. Fixed income has been virtually flat, increased by just 20 basis points.