Prices of U.S. commercial property sold by institutional investors fell 5.8 percent in the first quarter, marking the fourth consecutive quarterly decline, according to an index published by the Massachusetts Institute of Technology.

Meanwhile, buyers continue to expect to pay less for properties, but sellers are actually expecting prices to improve, leading to fewer deals, MIT said on Tuesday.

Nobody can sell any properties, said MIT Professor David Geltner, director of research at the Center for Real Estate. Liqudity has almost completely dried up.

MIT's transactions-based index (TBI) tracks prices that institutions such as pension funds pay or receive for commercial properties including shopping centers, apartment complexes and office towers.

The index is down 21 percent over the past year and down by more than a quarter from its 2007 peak. Its decline now nearly matches the 27 percent drop in the commercial property downturn of the late 1980s and early 1990s, according to MIT. MIT said it publishes the only price index based on closed deals.

The index, with a base value of 100 in 1984, now stands at 169.4. It peaked at 230.3 in the second quarter of 2007.

A separate index that tracks the prices that potential buyers are willing to pay has fallen for seven straight quarters, and is down 39 percent from its 2007 peak.

By contrast, a measure of the prices institutional owners of commercial properties are willing to accept was actually up in the first quarter, creating a disconnect between supply and demand in the market.

That is partly because many institutional investors are deep-pocketed, carrying little debt, and do not need to sell, Geltner said.

The most recent TBI index was based on just 19 completed transactions during the quarter, down from 40 deals the previous quarter and compared with about 200 near the peak. The scarcity of deals partly reflects their size: properties are worth, on average, about $50 million.

The first quarter could mark the nadir in market sentiment, Geltner said, since stock prices has rebounded over the past two months, as have shares of real estate investment trusts (REITs).

The next development to watch for is an increase in distressed property sales, he added.

That's a good development when that starts to happen because then the market begins to reliquify, you begin to get transactions. They're at lower prices, but you begin to get a functioning market.

I think we're going to move into that phase in commercial property, though we haven't seen it much yet. Time is on the side of the buyers at this point.