Germans freeze £21bn property funds

Nearly €30bn of German property funds were frozen between Tuesday and Friday last week in what industry experts fear could foreshadow a UK commercial real estate collapse.

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The 11 funds involved suffered from a string of major investors pulling their cash to raise liquidity. In order to redeem the money, the funds have to sell assets in their property portfolios, which is costly as the real estate market is in freefall. The funds responded by not allowing redemptions for three to six months.

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The move is significant for the UK, as German funds have been among the most active in snapping up City of London and West End properties this year. A leading financial restructuring expert said that similar problems are likely to hit UK property funds. "Commercial real estate is going to be the really big sector for our line of work in 2009," he said.