Schroders, the fund manager, is predicting that value may soon emerge from the wreckage of the commercial property industry after the swift correction in pricing.

William Hill, head of real estate at the group, yesterday told the Financial Times the sector was in “dire straits”, but that there would be opportunities as the market stabilised next year.

“The market is 15 per cent cheaper from June this year and it may become a bit cheaper, but going forward it may make sense for institutions to make commitments to real estate,” he said. “The market is difficult but the floor may soon be in sight.”

However, last night that prediction looked optimistic against a backdrop of further woes in property fund management.

Institutional funds are taking extreme measures to stop investors from leaving their funds. Deutsche Bank, for example, has told investors in its RREEF UK core real estate funds that they will have to wait up to a year before they can pull money out.

Like others in the sector, Deutsche had already reinstated a three-month redemption period, but it is understood this was still not enough to ensure sufficient time to generate liquidity through the sale of property.

A similar 12-month waiting period is being invoked in UBS’s £2.3bn Triton property unit trust and Morley’s £1bn Pooled Pension Property Fund.

Triton, which operates monthly trading periods, saw £60m in redemptions yesterday. Like many funds, Triton has always had a 12-month redemption period in operating rules, but it has not been necessary to implement until now. UBS and Deutsche Bank refused to comment.

Many analysts, agents and executives agree the sector is in its biggest correction since the early 1990s – a period remembered with trepidation.

Investors are not heeding reassuring words that the underlying occupier market is sound and the over-development of 20 years ago has not been repeated. Instead, many are fleeing, causing a liquidity crisis as fund managers struggle to find cash to meet growing redemption requests.

So far, only institutional investors have had to wait for their money, but some analysts believe it is only a matter of time before retail funds follow suit.

It emerged yesterday that Norwich Union is preparing emergency plans to suspend redemptions in the UK’s largest commercial property fund if necessary.

Norwich Union’s fund has seen a drop in liquid assets – cash and real estate equities – from 18.4 per cent at the end of July to 12.4 per cent at the end of October.

It is understood that Norwich Union is in the process of selling property to help cover payments to departing investors.

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