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The latest International Property Databank (IPD) index announcement has shown property grew by 2.5 per cent in the past quarter, as the sector continued to recover from the collapse of the property bubble during the credit crunch.

The news will come as a relief to property fund managers, many of whose funds remain suspended due to a lack of liquidity.

Astrid Cruickshank, property manager at Seven Dials Fund Management, said UK high street shops would benefit as retailers competed to snap up prime locations.

She said: "We are now beginning to see more than simply green shoots of recovery in the sector."

The manager said Brighton, Guildford, Harrogate and Chichester put in the best performances in the UK.

"In Chester, half a dozen units that were recently available because of individual company failures have been rapidly taken up by retailers who were waiting to get into the prime pitch," she added.

But she warned the rebound in commercial property would ease off in the coming months, in-line with other asset classes like equities.

"There has been significant recovery in yields, and prime commercial properties in London are seeing interest from overseas investors, given the weakness of sterling," Ms Cruickshank said.

The manager's Lightstone Prime High Street fund is set to target investments between £1-7m with initial yields between 6-7 per cent, as it goes on a buying spree on the high street.

Meanwhile, consultancy McKinsey has said new research showed assets under the management of real estate funds remained relatively stable last year despite the collapse of the property bubble.

The group said assets actually rose by 5 per cent, as equity inflows of 4 per cent and increased leverage of 8 per cent offset a 7 per cent fall in valuations.

But real estate managers with a focus on UK property saw more severe falls of 22 per cent on their assets, versus a 2 per cent fall in continental Europe.

Group partner Philipp Kock said profit margins came under pressure at real estate asset managers last year, dropping from 37 basis points to 32 bps as management fees fell by 7 per cent.

He said: "Profits have come under pressure, and a fundamental relief does not seem likely in the near future.

"Real estate fund managers should think about approaches to tackling inefficiencies in a capital-preserving way."