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London commercial property on road to recovery

This is because investment values and rents are falling making London a more attractive proposition for real estate investors, Phillipe Zivkovic, executive chairman of BNP Paribas Real Estate, told the conference in the south of France.

He said that the French investment market was still adopting a wait and see approach, while London would be targeted over the coming months particularly by German funds.

'If you look at the Paris market, the investors there are looking at the price levels and wondering if they are sufficient to create an opportunity of capital gain. Instead they are taking an increasing interest in London, where there has been a sharp drop in values,' he said.

Meka Brunel, managing director Europe of SITQ, the real estate subsidiary of the Caisse de dépôt et placement du Québec, predicted that rental levels in London still had further to fall, sharpening the fall in investment values.

'There has been a drop in the rental levels in London and I doubt that process is over. There could be another 20% farther to go,' she said.

She added that although rent reviews were not supposed to go downwards, landlords were finding themselves in such a predicament that tenants could secure favourable terms. Many occupiers will be going to their landlords and seeing if they can do a deal.

The best strategy for major investors is to build up reserves ready for when the market recovers, Zivkovic told some of the 20,000 property bosses, advisers, bankers and politicians that attend the conference. 'We need to build a war machine to make sure we are in all the right places when the market comes back,' he explained.

Meanwhile one of the first large buildings to be unveiled at the conference was a £125 million mixed use tower to be built in Birmingham, UK. Designed by Aedas for developer Regal Property Group, it will include a hotel, retail, sky bar and residential units on a site on the corner of Broad Street. Work is expected to start on site in 2010, subject to planning approval.