London’s Jewson Associates is encouraging long-term investors with no liquidity restraints to consider increasing their exposure to commercial property.

"Commercial property prices in the UK have fallen 42 per cent from their peak in June 2007, as measured by the headline IPD index. As a consequence, property yields, which were below government bond yields in 2007, now stand at a significant premium,” says Tim Brown, head of strategy at Jewsons.

According to Mr Brown, falls in value and increased yields not only reflect concerns about tenants defaulting and voids rising, as a result of corporate bankruptcies such as Woolworths, but also forced sellers in the market trying to raise money to reduce their debt. The need to reduce debt and strengthen their balance sheets has also caused a number of quoted property companies, such as Land Securities and British Land, to have large rights issues.

The very weak economic background, particularly on the high street, combined-with forced sellers and rising defaults, will keep property values under pressure for some time, Mr Brown says.

"But the current yield on property suggests that depression aside, commercial property is becoming a cheap asset class. We doubt that values will show much, if any, progress in the near term but for the patient long-term investor with no liquidity constraints now is the time to consider increasing exposure to commercial property," he adds.

In a recent survey of UK HNW and UHNW individuals by Tulip Financial Research, 17 per cent of HNW individuals said they owned residential property excluding homes or homes, contrasting with 41 per cent of UHNW individuals who said they owned such property.

“Choosing a few good value properties that hold their value has proved easier and more effective than choosing a dozen or so investments in individual company shares,” said John Clemens, managing partner of Tulip Financial Research.