Heading into 2010, the status of the commercial real estate market may not be so gloom and doom.

As the New Year approaches, declines across the nation’s commercial real estate sectors are easing slightly, according to the latest edition of the Investment Trends Quarterly report, a study produced jointly by the CCIM Institute and the Real Estate Research Corporation (RERC). While growth across the commercial property market is expected to remain sluggish through at least the first quarter of 2010, a meaningful recovery is projected to follow during the second half of the year, the report said.

“For those of us involved in the business of commercial real estate, stress has turned to distress,” said Richard Juge, 2010 president of the CCIM Institute. “Reports of foreclosures on high-quality properties and failed banks are occurring almost daily. Property values continue to decline, along with occupancy rates and rents.”

However, Juge said there are signs of improvement. While the path ahead is rocky and will be difficult to navigate for many, he said it will also provide some extraordinary buying and leasing opportunities.

Several key trends were noted in the Investment Trends Quarterly report. For some property types, transaction volume is increasing on a quarter-to-quarter basis, but it is still declining overall on a 12-month trailing basis. In the office, retail, apartment, and hotel sectors, volume increases were reported in third quarter 2009, and the only property type to see a quarter-to-quarter decline in volume was the industrial sector. Additionally, the report found that 12-month trailing prices declined slightly across the board during the third quarter, but the report found pricing is beginning to inch up for several property types on a quarter-to-quarter basis.

To determine the relative health of each major commercial property sector, the report also captures market-specific data. A rating system of one to 10 is used to grade existing investment conditions, with 10 being at the high end of the scale.

With a rating of 5.5, apartments fared the best among commercial property types in the third quarter of this year. This is up from the second quarter when apartments were rated 4.3. Unchanged from the previous quarter, the industrial sector ranked second among survey respondent with a 4.3 rating, and retail and office sectors tied in the third quarter with a rating of 3.8. This rating was up from the second quarter rating of 3.4 for retail and 3.5 for office. Although the 3.6 rating of hotels in the third quarter came in at the bottom of the survey, this was an improvement of the sector’s rating of 3.4 in the second quarter.

As the industry enters 2010, the report highlighted a few trends to watch for. Credit is projected to remain tight, and as more commercial loans come due, bank foreclosures are expected to increase. Despite the upcoming holiday season, the report said consumer spending will remain relatively sluggish. Vacancy rates for all major commercial real estate sectors are projected to increase throughout most of 2010, and capitalization rates are expected to move slightly.

According to the report, commercial property sales prices and rents will remain mostly flat or decline further, and construction in this market will remain slow. However, sales volume and transactions are expected to increase, and the report said more entrepreneurs and opportunistic funds will be looking more closely at real estate.

The Investment Trends Quarterly report aims to provide timely insight into transaction volume, pricing, and capitalization rates for the core income-producing properties. Sponsored by the National Association of Realtors (NAR), the quarterly report is produced by Chicago-based RERC in association with and for members of the Chicago-based CCIM Institute.