LONDON- Julian Barwick, joint managing director of Development Securities and one of the industry's leading figures, has issued a sobering reflection about the state of the commercial property market. Barwick has warned of "an asset pricing bubble" in the property investment market.Last year was a record one for investment in the London office market. Figures produced by Cushman & Wakefield, Healey & Baker point to about 300 deals worth more than euro 14 billion ($18 billion) that were completed. Lambert Smith Hampton estimates sales of euro 60 billion ($78 billion) for Britain as a whole. But Barwick is the first head of a quoted property company to give voice to fears about the retail property market. In a company statement attached to their results he said: "Transaction activity during 2004, with acquisitions outweighing disposals, totaled £71.2 million. In total, nine properties were sold for £33.8 million, generating a 15% net surplus over book value. We perceived there to be an asset pricing bubble and subsequently moved to crystalize significant valuation surpluses on certain assets.

"Most notably we took the decision to offer our two West End holdings to the investment market and secured the disposals of both buildings, on sub-6% yields, for a combined surplus of £3.1 million, some 23% above book value. By way of comparison, the office market showed 8.6% capital growth," he added.

Barwick is not the only experienced head to advise caution with the market in general. Veteran investor Gerald Ronson, head of Heron International and a survivor of two property crashes, gave a rare newspaper interview over the weekend in which he said he was cautious about making future commercial property deals because of the state of the market.

According to IPD, commercial property investment returns lost year rose 19% and at the end of December the IPD monthly index, was up from 11.3% a year earlier.