The market has been predicting that banks will reduce their distressed loan books for some time, but there is now a rising tide of evidence that this is actually happening, according to specialist Central London investment adviser Gresham Down Capital Partners.

The firm, which transacted more than £620 mln (EUR 728 mln) in 2010, pointed to the increasing number of receivership sales such as Centre Point, in the West End, and Goldman Sachs' Peterborough Court and Plantation Place in the City as an indication of this trend.

'If you are a seller our general advice for 2011 is to sell sooner rather than later; investor demand still exceeds supply but the dynamic is set to change with more sellers emerging and, in particular, the banks,' said Stephen Down, managing partner of Gresham Down. 'There won’t be a flood but the increased supply will create a more clearly-defined two-tier market with a wider pricing disparity between prime and secondary stock.'

Where banks are not directly calling loans, they are increasingly pressurising leveraged investors to sell as loans approach maturity. Examples of this include Cosgraves' recent £95 mln sale of 301-307 Oxford Street and 17 Hanover Square W1, under pressure from a consortium of banks led by Ulster Bank. And the consortium of banks which originally financed the acquisition in 2007 by Derek Quinlan and Propinvest of the £1 bn Citigroup Tower are also forcing a sale, it added.

The investment adviser also noted that over £50 bn of UK commercial property loans expired in 2010, and that there is more than £100 bn of additional commercial loans maturing over the next four years. Gresham Down said given the restricted availability of new finance it is inevitable there will be more bank-led sales.