"A full and vibrant recovery is many months away," President Obama warned last week.

Or more. Even as the stock market bounced partway back from last year's collapse, the value of real property - commercial office buildings, factories, warehouses, stores - has kept falling.

That means a lack of confidence in the economy by landlords and speculators, a lack of profit incentive for builders and developers, and paralyzing problems for banks and investors, who don't dare fund risky new loans because they're swamped with big old unpaid loans that can't be refinanced as they come due because the borrowers now owe more than their assets are worth.

The Pennsylvania Public School Employees' Retirement System, the state's biggest investment fund, showed how ugly things look when it said Friday that its real estate investments fell 43 percent in value,

to $4.8 billion, in the year ended June 30.

The biggest decline hit properties purchased in 2006 and 2007, at the end of the boom. An earlier PSERS report showed real estate investments that cost PSERS managers $1.51 billion in 2007 were worth just $876 million by Dec. 31 of last year - before the latest write-downs.

Smarter than Morgan?

Some funds wrote down assets a lot faster than others.

For example, Morgan Stanley Real Estate Funds last year wrote down $154 million of PSERS's 2006 property investments by 73 percent, and wrote down $280 million invested in 2007 by 80 percent.

By contrast, Lubert-Adler Funds, of Philadelphia, marked down $90 million in PSERS investments from 2006 by just 9 percent, and took $30 million invested in 2007 down just 7 percent, by year's end.

Was Lubert-Adler that much more successful than Morgan Stanley in its property selection? Or did Lubert-Adler delay writing down its PSERS investments, in hopes 2007 prices will somehow come roaring back?

Founders Ira Lubert and Dean Adler didn't return calls Friday.

No props

Won't the government bail out commercial real estate, with so much at stake?

"The government has been propping up residential real estate, which means a lot of voters," said Olivier Garrett, a veteran business-turnaround specialist who now runs Vermont-based Casey Research L.L.C.

"Fannie Mae and Freddie Mac, even though they're bankrupt, have been financing conventional loans at rates that are very low, driven by the Federal Reserve's action. That's created the very temporary illusion that the housing market has stopped falling.

"But I can't see government propping up commercial real estate. That would mean propping up speculators and developers, people who are not popular today."

Pulling back

"Builders appear to be pulling back on construction as fast as they can," and "there is no way of getting around the deteriorating fundamentals," wrote Wells Fargo Securities economists Mark Vitner and Anika Khan in a report last week, citing grim Fed and Commerce Department data.

More from their report: "We expect construction activity to continue to pull back over the next 18 months," as "property values still face significant further declines."

Commercial real estate delinquency zoomed from 2 percent to 8 percent in the last year, the highest since the savings-and-loan bank failures of the early 1990s.

Things would have looked worse, except for a mini-boom in oil refinery, coal, and power construction projects. But those jobs are now "being scaled back, extended, or canceled outright" as demand for power "remains at historical lows."

Instead of moving in together to start new families, young people are going back to their parents or clubbing up in crowded dormitory-style units. Apartment rents have been falling since last year. Vacancies, at nearly 8 percent, are the highest since before 2000. "A significant improvement in demand is still likely two years away."

One-seventh of office space is vacant. Office rents have fallen for four straight quarters.

Office space sold for $300 a square foot in early 2007; it's now averaging below $140.

One-tenth of stores are vacant - "the highest on record." New stores in the second quarter were "the lowest on record," and "the prospect of another dreadful holiday season will lead to another round of bankruptcies and store closings in 2010."

More industrial space is falling vacant - both warehouses on the coasts and factories in the Midwest and South. We'll know things are looking up for the economy as a whole when industrial companies start signing new leases in low-wage areas again. "Recovery is still several quarters off."