Aberdeen Asset Management is planning to launch a British property fund to buy into a commercial property market that it expects should bottom-out from the middle of next year.

The fund could be raised as early as next spring and will have at least £100 million of equity raised from a handful of institutions. Aberdeen’s move comes amid growing fears that prices of British shops, office and warehouses will have fallen on average by 25 per cent from their peak this June to the end of 2008, based on current trading in the property derivatives market.

Prices of some out-of-town retail properties are thought to have fallen by 20 per cent already and could end up down more than 30 per cent from their peak if, as is widely expected, a sharp fall in consumer spending hits rental growth.

Aberdeen’s announcement comes in the same week that New Star,one of Britain’s largest commercial property fund managers, was forced to write down its flagship UK property unit trust by 8.2 per cent to £1.74 billion, bringing the total fall since August to 17.8 per cent.

Confirming Aberdeen’s intention to raise money for a new UK property fund, Glenn Newson, managing director of Aberdeen property investors UK, said: “Our intention is to raise funds and provide property returns for investors. I think the market is likely to need until at least the second quarter to rebuild confidence.”

Mr Newson admitted that Aberdeen, which manages £100 billion of funds, may find it “challenging” to raise debt as early as the second quarter next year for its new property venture. “We do not need necessarily to include an element of debt. Debt has its place, but only if it is performance-enhancing — and I do not see it being so for the next 18 months.” Prices of commercial property began to fall in July as the rising cost of debt forced a number of leveraged private buyers out of the market. Deals ground to a halt after September as the credit squeeze forced sellers to pull deals.

The large American and European investment banks have put all lending to commercial property on hold as they digest multibillion-pound writedowns on their loan books. The collapse of the US sub-prime loans market has pulled the plug on borrowing via the Commercial Mortgage Backed Securities market, as investors turn cold on any form of property loan. A handful of banks have begun to lend from their own balance sheet, but only on property investments worth up to £400 million each, sources said.

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