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| British Land is still looking for tenants for its Leadenhall development |
These are difficult times for UK real estate funds. Some of the collective panic that hit Northern Rock’s customers last year spread into the real estate sector. In the last quarter of 2007, more than £1.6 billion ($3.11 billion) flooded out of commercial property funds as nervous investors, mainly retail, decided to cut their losses. Figures from the Association of Real Estate Funds (AREF), which surveys £37 billion of property funds, showed outflows up by 76% in the third quarter of 2007.
This was after at least six UK property funds slapped restrictions on withdrawals. The rush for the exits prompted by the UK property slump forced the hand of Scottish Widows, Scottish Equitable, Friends Provident, Morley, UBS, Schroders and Deutsche to stop redemptions.
Rachel McIsaac, chief executive of AREF, said retail investors had led the stampede. But institutional money was being pulled out too.
Peter Hobbs, head of research at Deutsche Bank’s RREEF, which manages £100 billion, said in January that the UK commercial property market was "falling apart".