More than £1.6bn was withdrawn from commercial property funds during the last quarter as the severity of the sector’s slump alarmed investors. Financial Times, The Times

Outflows surged 76% from the third quarter to record levels, in spite of moves to deter redemptions, according to the Association of Real Estate Funds.

The downturn in property prices prompted investors to exit funds that many would have been advised to buy only months earlier.

Rachel McIsaac, chief executive of AREF, said the redemptions were led by retail investors. Institutional investors, such as pension funds, tended to have fixed allocations to commercial property.

'A lot of people were persuaded to buy into property this time last year,' she said.

The AREF survey covers £37bn of property funds, including the big unit trusts run by the likes of New Star and Norwich Union, though most of the money is held in pension funds.