Bright Spots Appear in Commercial Property Cloud

Some bright spots have started to appear among the clouds hanging over the commercial property sector, especially in the UK, where prices have dropped faster than in the rest of Europe, analysts and investors told CNBC Tuesday.

However, the sector must still be approached with care and projects should be hand-picked carefully, because a lot of uncertainty remains regarding the outlook of the world economy, they said.

In London, despite the crisis, projects have been going ahead, with a glass tower, the city's tallest, expected to be finished by 2012. It will be "effectively, a new corner of London that will employ 12,500 people," Irvine Sellar, chief executive at Sellar Property Group, told CNBC.

But outside London, the picture is pretty bleak. UK vacancy rates hit a record of 12.3 percent in August, compared with an average of 7.1 percent over the last 14 years.

"There is still a lot of occupational risk and investors are very nervous of that," Claire Higgins, head of commercial research at Knight Frank, said.

But some are taking advantage of this to grab opportunities. Commercial property investment company Hansteen Holdings has raised 200 million pounds ($326 million) to take advantage of the distressed commercial property market.

"When people need to find money, need to sell, that's where you get good value purchases. So that's really why it's such a good opportunity at the moment," Morgan Jones, Co-CEO, Hansteen Holdings, said.

Although the outlook is cloudy, there clearly are things to buy out there, Nick Axford head of EMEA research at CB Richard Ellis, said.

One of the first things to be hit by the crisis was financing for developments, according to Axford. "What we're looking for is some schemes starting to come through the pipeline now, which are intending to hit the market in 2012-2014 where probably the supply is going to be a lot lower."

"As with everything, a good investment is all in the price. I think we will continue to see good demand for the best quality products," Axford added.

- Watch the video above to see the full Nick Axford interview.