A report says net capital flows into UK commercial property fell to £58bn in 2006, slightly down on last year's record high.

Property agent DTZ said while the market "remains a magnet" for overseas investors, it warns investment conditions have become more challenging over recent months, reflecting a slowing of deal volumes.

However, the UK remains the largest and most liquid commercial property investment market in Europe, accounting for one-third of net capital inflows, 40% of total investment deals and about 30% of all cross-border deals. The report says private debt, which accounts for half of all capital, remains a key driver of the UK market, with bank lending to the sector growing by 13%.

It says: "The UK market has continued to benefit from development of indirect vehicles, widening the range of access routes available to investors and improving both market liquidity and risk management."

DTZ forecasts a further dip in activity this year, with projected capital flows of around £50bn.

However, a "wall of money" continues to fuel global property investment, with deals soaring 25% to hit a record $600bn - 150% higher than three years earlier.