Values for office buildings, stores and warehouses in the U.K. dropped 26.4 percent, while the decline in Ireland was 37.2 percent, London-based IPD said on its Web site today. In the 18 months through December, all the gains made in the U.K.’s five- year boom to mid-2007 were wiped out, the research company said.

“Such has been the severity of the falls in values that on a pure comparison basis, the U.K. market now looks attractively priced,” IPD Research Director Malcolm Frodsham said in the report.

Lending restrictions imposed by banks last year caused the number of commercial-property transactions in the U.K. and Ireland to plummet. Ireland was the first euro-region country to report an economic recession and Dublin offers the worst property-investment prospects among Europe’s major urban markets, PricewaterhouseCoopers LLP said in a separate survey today.

The annual property declines for both the U.K. and Ireland were the biggest since IPD started compiling the indexes in 2001 and 1984 respectively. In the fourth quarter, U.K. commercial- property values declined 14.4 percent from the previous three months. In Ireland, the drop was 17.7 percent.

‘Challenging’ Year Ahead:

The U.K. commercial-property market will remain “challenging” this year, though the decline in values will slow in the first quarter, Land Securities Plc Chief Executive Officer Francis Salway said Jan. 20. Salway predicted an “extended period of weakness,” reflected by higher vacancies. Land Securities is the country’s largest real estate investment trust.

Trading in U.K. commercial real-estate derivatives was unchanged in the fourth quarter, IPD said in another statement today. Derivatives with a face value of about 1.03 billion pounds ($1.47 billion) were traded, the same as in the prior quarter.

About 7.7 billion pounds of trades were completed in 2008, down from 8.3 billion pounds a year earlier.

“Whilst turnover in the over-the-counter property derivatives market still remains at just under half that of the institutional direct market, absolute levels are holding up better,” said Ian Cullen, co-founding director of IPD.