Rents at small-capitalization properties continued to fall last month, but the rate of decline has tapered off somewhat, which might indicate that the worst could be over for the sector.

According to Boxwood Means Inc., a Stamford, Conn., research company that focuses on small-cap properties, all sectors continued to see rental drops, with industrial and certain retail buildings seeing the biggest drops. But those declines are nowhere near as large as they had been during the market's freefall during the middle of last year, when monthly drops in some subsectors were greater than 100 basis points.

Another reason for optimism: Boxwood has found a strong correlation between the performance of the residential housing market and small-cap commercial properties. And the residential market has seen an uptick in sales and potential stabilization of pricing, which could portend a period of stabilization for many small-cap properties, particularly retail.

In addition, small-cap properties, which it defines as those with less than 50,000 square feet each, tend to be far more responsive to market conditions than large-cap properties because of the relative short duration of their leases. And most are owned by local operators who can quickly react to local economic conditions with rent concessions, reductions or increases.

Boxwood compiles property-level operating and sales data through a partnership with LoopNet Inc.

It is less optimistic when it comes to industrial property rents, which it believes will continue to see rental declines - in some cases steep ones - because of the sharp downturn in manufacturing and weak demand for warehouse space.

Rents for industrial properties overall were down 73 bp in July to $7.52/sf. They're now down 6.44 percent from a year ago.

Boxwood gathers data on five distinct retail property types: street retail, free standing buildings, shopping centers, strip centers and other retail, which would include small strip centers.

Overall retail rents were $18.24 in July. That's down 60 bp from June and 5.82 percent from a year ago. Free-standing buildings have been most hard hit, seeing a 60 bp decline in rents in June and 7.3 percent decline from a year ago to $16.28/sf.

Shopping centers, meanwhile, saw a 49-bp decline in rents in July to $18.20. That's down 5.44 percent from a year ago.

As in previous surveys, Boxwood found sharp differences in the rate of rent declines among the various regions it tracks, with retail properties in the Northeast substantially outperforming, in terms of rent declines, those in other regions.

Small office properties, meanwhile, which generally do not rely on financial services firms, have so far seen the smallest rental drops. In July, they were down only 31 basis points to $18.03/sf. That's down only 2.49 percent from a year ago.

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