Prices are still 4% above the August 2007 peak despite July's decline.

NEWPORT BEACH, CA-An uptick in interest rates has begun having the opposite effect on commercial property values, Green Street Advisors said Tuesday. The company reported that its monthly Green Street Commercial Property Price Index declined by 1% in July.

“Property values have enjoyed a robust recovery over the last four years, more than recouping all the ground that was lost during the financial crisis,” the firm says in its latest report. “That recovery has been put on hold as increases in interest rates weigh on pricing.”

Even with the decline, however, prices in Green Street’s index are still higher than they were at their August 2007 peak. With the July decline factored in, prices stood at 4% above the mid-summer ’07 high water mark. They’ve increased 10% over the past 12 months. Green Street bases its indices largely on values in REIT portfolios.

Among the most active playgrounds for REITs is Manhattan office, and Green Street said Tuesday that its Green Street Midtown Manhattan Office Price Index was flat through July. Prices there are currently at early-’07 levels, or 10% to 15% below the August ’07 peak.

“Low rates were the primary reason that property values recovered as much as they did, so it’s no surprise that pricing would take a breather at this point,” says Peter Rothemund, an analyst at Green Street. “Going forward, much depends on where interest rates go. If they stay at current levels, property pricing should settle near today’s values.”

In July, Moody’s Investors Service said its Moody’s/Real Capital Analytics national all-property index fell 0.6% in May from the prior month, while remaining 6% over the year prior. “The results do not yet fully reflect the impact on prices of the recent uptick in the 10-year Treasury,” on which yields have risen to 2.66% from a low of 1.63%, Moody’s said in July. “We expect prices over the near term to remain flat or decline, as improvements in occupancy and rent arising from increased employment lag the drag on value resulting from higher borrowing costs.”