U.S. commercial property prices rose 0.9% in June, the second straight monthly gain, as buyers increased purchases in smaller cities in search of higher returns, according to Moody's Investors Service.
The index, which measures broad price trends, is down 6.6% from a year earlier and 45% from the peak of October 2007, the company said in a report Monday.
The increase represents a "firming up" of the market bottom as investors moved beyond trophy properties and major U.S. coastal cities, Moody's said.
Turmoil in capital markets and a recent drop in lending of commercial mortgage-backed securities may delay "significant" near-term price increases, according to the report.
Europe's debt crisis, signs the U.S. will remain mired in sluggish growth through next year and Standard & Poor's downgrade of the nation's credit rating roiled financial markets and triggered a sell-off in securities linked to debt on commercial real estate.
Wall Street firms are ratcheting back on originating new commercial property loans to package for sale, making it harder for banks to gauge how much cash they will recoup in bond sales and boosting rates for borrowers.