Debt held against UK commercial property fell again during the first half of 2011 as the market continued to show some signs of resilience in the face of global and domestic economic difficulties.

The UK Commercial Property Lending Market Report by De Montfort University in Leicester found that the value of outstanding debt fell by 3.4% to £201 billion in the first half of 2011.

However, approximately half of this debt, it warned, could not be refinanced on current market terms, while one quarter of it was secured on a loan-to-value ratio of more than 100%.

The study, the largest of its kind on UK commercial property debt, estimated total UK debt at between £280 billion and £292 billion at mid-year 2011 (down roughly 3% from the end of 2010). This continues a trend of measured reduction in debt that has avoided panic measures and a collapse in capital values.

The uncertainty created by the Eurozone crisis and a stagnant UK economy has worsened the lack of liquidity and increased the cost of capital in the property lending market. It also saw the lending market contract. While 66% of lenders were prepared, in theory, to lend against commercial property, the proportion intending to increase the size of their loan books had fallen to 35% by mid-year 2011. The majority of willing lenders were looking for prime office property in strong performing locations.

Bill Maxted, co-author of the report, said: "Lending organisations commented that the existing liquidity crisis had been made more acute by the problems of European sovereign debt and the unknown extent of contagion between banks.

"Respondents have suggested that only an increase in confidence in the UK economy, demonstrated by a number of quarters of sustained growth in UK GDP, would signal a recovery in the commercial property market in the UK."

Liz Peace, chief executive of the British Property Federation, said: "These figures underline how critically important it is for government to use all of the tools at its disposal to help tackle this overhanging property debt.

"This means encouraging new debt buyers in to the market - something that we think reform of the real estate investment trust regime to allow the creation of mortgage REITs would help to achieve.

"It also means finding ways to encourage new investment and spur economic growth. One easy way would be to stop charging full business rates on empty commercial properties, something that is a considerable disincentive for landlords who wish to invest in premises for small and medium firms."