The number of financial advisers expecting commercial property prices to fall over the coming 12 months continues to increase.

Research carried out in October 2010 on behalf of Reita, the education and awareness campaign for quoted property and REITs, shows confidence in commercial property prices faltering amongst independent financial advisers (IFAs).

At the start of the year only 5% believed there would be a price drop, rising to 7% in April, 21% in July and 26% in October. The majority now feel prices will drop or remain static over the coming 12 months.

Peter Cosmetatos, director of policy at the British Property Federation, said: “The lack of confidence in the commercial property market reflects both the views of many industry specialists and the uncertainty felt in the UK economy more broadly. With close to 500,000 public sector job losses expected in the wake of George Osborne’s Comprehensive Spending Review, the knock-on effect in the demand for commercial property may well be considerable. We would expect the effects to be felt most acutely in areas heavily reliant on the public sector or public expenditure.”

Despite increasing concerns over commercial property values, investor confidence in REITs appears robust. Of those expressing a view either way, over 57% indicated they would be interested in REITs and funds that invested in REITs.

Peter Cosmetatos suggested that this can probably be explained by REITs disproportionate exposure to prime property in the nation’s capital and key regional locations:

“The UK’s leading REITs not only tend to be focussed in London, which is significantly less exposed to the public sector, but are also concentrated at the better quality end of the property market where there is strong demand both from occupiers and from investors. This means REITs are not a good proxy for the commercial property market across breadth of the country, which remains polarised.”