As each day passes, it looks like one of the great bull runs of commercial real estate is “over”. We were already sliding into a global commercial real estate slump, and that slide will likely accelerate as the turmoil in the financial markets continues (this was written just after the wild Lehmann Bros.–Merrill Lynch–AIG weekend — and what a week this is turning out to be!).

After a number of years of stellar performance, by any standards, the U.K. commercial real estate market fell sharply in the second half of 2007 and capital values have continued downward throughout this year. Having been in the vanguard of a global, investor-led, real estate cycle, the decline in the U.K. market appears to be similarly ahead of a global retrenchment of real estate markets around the world.

The global credit crunch, volatile commodity prices and macroeconomic uncertainty have created a challenging investment environment. As institutional investors seek to mitigate risk, more assets are flowing into alternative asset classes. Watson Wyatt’s 2008 Global Alternatives Survey, published earlier this year in conjunction with Global Investor, found a 40 percent increase over the previous year in the volume of alternative assets under management on behalf of pension funds, within which real estate accounts for 62 percent.