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Reits will recover earlier than bricks and mortar funds, although direct industrial properties should show some early promise, according to fund managers in the sector.

Richard Carswell, business development manager at OPM, which runs a multi-asset property fund, said restrictions on investors removing money from property vehicles had "artificially propped up" bricks and mortar valuations.

He said: "In any future general recovery in sentiment towards property, bricks and mortar will struggle to perform, while Reits, trading as they are on huge discounts to NAV, will substantially outperform bricks and mortar."

But Howard Meaney, head of property investment at LV=, said although losses for 2009 would total 10-15 per cent, declines could reverse in 2010 and recovery could begin in 2011.

He pointed out yields had risen to 7 per cent.

"Coupled with historically low interest rates, this provides purchasers with fair value and the potential to realise significant returns over the short to medium term."

Mr Meaney pointed out property historically performed well during periods of inflation. Many economists are predicting inflation will return to the UK in the medium term in the wake of the government's low interest rates and quantitative easing programme.

Buyers needed to watch out for properties on long leases with quality tenants and rents protected by covenants, the manager said. They should also avoid areas with oversupply or planned or threatened development, he added.

One sector that looks particularly attractive, according to Mr Meaney, is industrial and retail property, which in the UK is chiefly used to house and distribute retail goods.

"So far, we don't have an oversupply situation with distributors going to the wall," he said.

But Mr Meaney said he was cautious on offices, as well as out-of-town retail and larger wholesale stores, which depend on the housing market.

"The office market has a long way to come down," he said.

Nevertheless, Reits stand to make an even better recovery when the market bottoms, according to Mr Carswell.

He cited the performance of UK bricks and mortar property funds against Reits over 36 months to April 14. Reits demonstrated a higher beta than bricks and mortar - rising and falling at the same time as bricks and mortar, but in a more extreme fashion.

Tony Yousefian, chief investment officer at OPM, said the firm had invested a large proportion of its Property fund in Reits in anticipation of discounts narrowing.