As commercial property companies face up to the eighth month of debt markets remaining largely closed to business, investors will be taking a keener eye than ever on the health of their balance sheets and development pipelines.

As The Times revealed today, overseas property companies including Abu Dhabi's Aldar, are casting the slide rule over the UK quoted property sector. Hopes are increasing that as the credit squeeze continues to tighten its grip the share prices of some of the big businesses with well-let portfolios and low-levels of long-term borrowings will at last start looking fair value or even cheap.

Fears of further sharp falls in the share prices of London-focused office developers are however now looking a distinct possibility. Research from MWB Business Exchange, the serviced office company, published in The Times over the past six months revealed for the past six months that banks are increasingly taking short-term leases on London offices rather than commit to new long-term large lets, stoking fears that they were planning job cuts.

Those fears were confirmed by research out last week from Atis Real, the commercial property agency, showing that banks accounted for just 8 per cent of new City office lettings during the first quarter of 2008 compared with their long-term proportion of 40 per cent. Today Jones Lang LaSalle reports that office lettings overall in central London fell by almost a third over the past six months as prospective tenants put their office searches on hold.

Bankers at Lehman Brothers have waded into the unease predicting City office rents could fall 15 per cent this year as a lack of demand meets a glut of newly built but empty office buidings. Rents were expected to stabilise this year after growth of 15 per cent per annum for the past two years.

Lehman predicts retail warehouse rents could fall 10 per cent this year as existing tenants default on leases just as demand for new space dries up in a weakening economy.

All the gloom leaves shares in British Land, Britain's largest owner of City offices, looking vulnerable as it has a number of large speculative schemes under construction that are either partially or completely unlet. The company is also one of the largest owners of retail property with both large shopping centres and retail parks as part of its £14 billion portfolio. The shares have been hit, down some 7 per cent last week. Lehman has downgraded the stock to underweight

British Land has, however, one of the best credit profiles in the property sector with Lehman ranking it sixth out of 19 quoted property companies. The company has also a track record of letting a large building nearly every year through both the highs and the lows of the last two property cycles stretching back to the early 1990s.

Investors may see the recent fall in British Land shares as an opportunity to buy. The shares rose 6 1/2p today to 906p.

Hammerson and Land Securities, the two other giants of the quoted property market, top Lehman's list for stocks to go overweight. Hammerson may have the better credit scoring than Land Securities but both have very little in the way of unlet speculative developements due to complete over the coming year. Both also have huge pipelines of development that can be built out ready for the uptick in the next economic cycle. Land Securities is also in the midst of a three-way break-up that could trigger takeover activity.

Of the industrial developers Brixton stands out with low levels of gearing and very little speculative development coming on stream. The company's focus on the Heathrow-to-Park Royal west London corridor where support services are still in good health means that tenant demand for its warehousing remains high.

All four companies - British Land, Land Securities, Hammerson and Brixton - are building up cash piles worth hundreds of millions of pounds to start buying distressed companies and assets when they think the market is close to bottoming out. None have started to spend yet in a significant way. Before they start buying however, cash rich overseas companies - from the middle east or closer to home - may turn thosze big UK property company predators into prey.

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