UNITED STATES - The Transaction-Based Index compiled by the MIT Center for Real Estate has indicated the value of commercial real estate owned by the large pension funds in the United States fell 5% in the fourth quarter of 2007.

This represents the second straight quarter that the value of the assets has dropped as there was also a 2% drop in the third quarter.

The TBI index tracks the price at which the bigger pension funds buy and sell commercial properties, and assets covered include a combination of office, industrial, retail and apartments usually located in the major metropolitan markets across the country.

David Geltner, director for the MIT Center for Real Estate, suggested: "The price decline we see so far in commercial property, as reflected in the TBI, may simply represent a correction of the froth that occurred in early 2007, as a result of very aggressive commercial mortgage underwriting practices."

One of the main reasons there has been a change in pricing is the highly-leveraged buyers have been taken out of the marketplace.  These were investors that have been buying properties using 80-90% debt but their source of capital is no longer available on the back of the shifting credit rates post- credit crunch.

This has led some pension funds to be less active in the marketplace in the buying and selling of properties until pricing issues become a little more stabilized.

The TBI is based on prices of properties bought and sold from the National Council of Real Estate Investment Fiduciaries (NCREIF) database. There is also appraisal information available on more than 5,000 NCREIF properties.