Despite a pick up in sales, commercial real estate prices posted a record drop in the second quarter, according to an index developed by the Massachusetts Institute of Technology Center for Real Estate.

With an 18.1 percent drop, the index, which tracks commercial property sold by major institutional investors, is now down 22 percent year-to-date, 32 percent from a year ago and down 39 percent from its mid-2007 peak, according to the report released on Monday.

The big news this quarter is not just the magnitude of the drop, but the fact that transaction volume actually increased in the presence of this decline, the first volume increase since last summer, David Geltner, director of research at MIT/CRE, said in a statement. Perhaps most important, the supply-side index of the prices property owners are willing to sell at plunged a record 18.5 percent, suggesting a degree of 'capitulation' that may help to finally bring market prices to a bottom.

The decline in nominal terms is far greater than the 27 percent drop the in the previous major commercial property downturn in the late 1980s and early 1990s. Adjusting for inflation, both periods are now tied at a 41 percent decline.

The downturn in commercial real estate, as marked by the index, also is greater than the collapse in U.S. housing prices, which are off 30 percent, the report said.

The 18.1 percent decline was the steepest in the index's 25 year history, far greater than the former record -- a 10.6 percent decline in the fourth quarter of 2008.

(Reporting by Ilaina Jonas; editing by Andre Grenon)

Inflation