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"It is foolhardy to go into deals where there is no income because we don't know how long it will be before the market comes back," said Lloyd Lee, director at Marathon Asset Management, speaking at IMN's European Distressed Real Estate Symposium in London on Monday.

Marathon, which has raised some $1 billion (680 million pounds) to invest in distressed assets, said that a lot of buyers were still waiting on the sidelines to see what happens, but seasoned investors would make discreet investments over the next few months.

Despite a 40 percent fall in British commercial property prices since summer 2007, investors seem reluctant to embrace the market.

Roger Orf, CEO of Citi Property Investors (C.N: Quote, Profile, Research), one of Europe's biggest investors, said he would not be interested in buying anything in the UK at the moment.

"In the office segment, the City of London remains a very tricky investment due to the profound change in the financial services industry. I prefer the West End," he said.

He also said the retail property sector was going through "an immense dislocation", reducing its appeal for bargain-hunting buyers.

"Local tenants are under a lot of pressure as consumption has declined so this is perhaps an area to steer clear of."

Giving a German perspective, Ruprecht Hellauer, managing director at Lohnbach Investment Partners, said his firm was focusing on non-performing loans (NPLs).

"We love to buy NPLs from German landesbanks," he said. "You will see a lot more opportunities coming out of German commercial mortgage-backed securities. If you get the timing right, NPLs will offer a good return."

But Orf struck a grim note for the industry when he said it remained tough to raise money for new investments. "Everyone lost a lot of money last year," he said.

"If you have cash available that you didn't spend you're in good shape, as it will take three to five years for the fund-raising model to repair itself."

Delegates at the conference said investors would become more confident about pumping money back into the sector as soon as a broadly expected flurry of fire sales begins.

"We are starting to get bullish because the only way is up," said Daniel Fasulo, managing director of research at Real Capital Analytics.

"Sellers are reluctant to capitulate and accept the reality of where pricing is, but 2009 will be about distressed sales."

RCA has tracked some 16 billion euros (14 billion pounds) worth of European commercial property sales in the first quarter of 2009, down 78 percent from 75 billion euros in Q1 of 2007.

"As more distressed assets change hands we will get a better idea of where the pricing is, but the window to pick up assets at stupid prices will be very short -- six months at most," Fasulo warned.

Source: http://uk.reuters.com/