According to Colliers CRE, commercial real estate values are set to overturn most of the losses suffered in the first half, as booming investor demand has taken prices back to near peak levels in some sectors.

The strength of the rally could lead to a second price correction, Colliers cautioned, with analysts warning that a bubble is being created. Colliers has upgraded its forecasts significantly for this year and next, estimating that the total return – the movement in property values plus rental income – for 2009 will be 0.4%, a rapid recovery from just a few months ago when the sector was still reeling from its heaviest slump. Colliers’ previous forecast was of -7.3% for 2009.

Russell Francis, head of valuation at Colliers, said: “The speed of the recovery in capital values for many properties has been quite dramatic.”

However, analysts are worried there could be a second price correction. Prices have been driven by a shortage of supply, which could change quickly given fears about the amount of property debt maturing.