City is marching to its own beat as property prices maintain status quo.

One year ago, Kevin Nunnink, MAI, chairman of Integra Realty Resources, suggested the perfect storm was brewing for the real estate market. Now that the storm has hit, its aftermath remains unclear. But Nunnink, who presented his 2008 outlook on valuation trends and the capital market this week, said Class-A commercial values should come away from the market uncertainty unscathed.

"Commercial values seem to be holding their own, but residential values are going down," Nunnink said.

Historically, residential market fallout has always been a predictor of recessions. Nunnink saw cause for concerns last year on several fronts. Increased reliance on oil imports, rising interest rates, securitization of real estate, lowest of the low cap rates and the fact that "few had skin in the game," gave rise to concerns last year, before the wheels came off the market on Aug. 20, he said.

Those in the industry had looked to bond buyers to bail out the market but--it hasn't happened.

"Right now it appears, according to Integra, that the bond buyers are sitting over here waiting for the dust to settle," Nunnink said.

While commercial values continue to hold in most parts of the country, the industry saw a sharp decline in sales during both September and October. Nunnink addressed the impact that a lack of sales will have over property values and his news is slightly cheerier than Moody's Economy predictions, which suggest a 10% price correction for the commercial market.

Nunnink expects some Class B and C commercial property values could come down 5 to 10%, but the demand for Class A will keep those values stagnant. "In terms of Class A properties, we're really not seeing anyone come off their price range," he added. But he continued by admitting that there are commercial products at risk. Suburban properties are most stressed, and he's starting to see signs of a decline from the retail sector, as evidenced by Wal-Mart's recent decision to withdraw from 140 real estate deals the company had in the works.

"My clients are telling me that anchors are cutting back," Nunnink said.

The health of the commercial market also rests with the location. Residential values are expected to plummet in many parts of Florida, which is suffering from years of condo over-building. And markets in Philadelphia and San Diego are in the "hypersupply" stage of the market cycle. Those markets are experiencing increased vacancy rates and moderate to low employment growth; they're likely to first experience declining property values. Markets (like Detroit and Kansas City) in the "recovery" stage and just beginning to rebuild from a recession, may also be vulnerable.

Recent conversions from Class B and C office space to condominiums has slashed the volume of less desirable office space and kept commercial demand high in Manhattan. If commercial property values take a hit here, it'll likely be limited to Northern New Jersey and the suburban markets, proving--once again--that the robust New York City market follows its own set of rules.