LONDON — The financial strains from Britain’s vote to leave the European Union are starting to show, as fear and uncertainty ripple through the country’s real estate market.
In the most prominent sign of the pressure, three major real estate funds have frozen investors withdrawals in the last two days, a rare move that reflects the mounting industry concerns. By doing so, the funds are trying to prevent a rush to the exit that could force them to sell assets at ultra-low prices and exacerbate losses.
The real estate sector has been especially hit hard following last month’s “Brexit” vote, which raised questions over the long-term viability of the British capital as a regional hub and cities across Europe look to lure companies and jobs from London. Since the vote, some real estate stocks have shed more than a third of their value.
Such pockets of weakness are a focal point of concern for the markets.
The Bank of England, Britain’s central bank, warned in a report published on Tuesday of a “challenging” outlook for the country’s financial stability, and noted in particular that there were “tightening credit conditions” in the commercial real estate market. Traders have long worried about mutual funds that invest in assets that are hard to buy and sell, but which promise to return cash to investors at short notice — like commercial property.
Illustrating those concerns, Aviva Investors and M&G Investments each said on Tuesday that they had suspended dealing in one of their Britain-focused property funds. Standard Life made a similar decision a day earlier.
Investor redemptions in the M&G Property Portfolio and its feeder fund “have risen markedly because of the high levels of uncertainty in the U.K. commercial property market since the outcome of the European Union referendum,” M&G said in a news release.
It said a temporary suspension would allow its managers time to “raise cash levels in a controlled manner, ensuring that any asset disposals are achieved at reasonable values.”
On its website, Aviva Investors said that its Property Trust fund, which was worth 1.8 billion pounds, or $2.4 billion, at the end of May, had been “experiencing higher than usual volumes” of redemption requests.
Their suspensions came a day after Standard Life Investments, the asset management unit of the large British insurance company, also halted redemption requests in its U.K. Real Estate Fund this week. It said it had seen an increase in requests for redemptions “as a result of uncertainty for the U.K. commercial real estate market following the E.U. referendum result.”
The concerns over the strength of London’s commercial property sector have also been evident in the stock prices of several major British real estate and construction companies since the June 23 referendum. Shares in companies including Barratt Developments, Taylor Wimpey and Persimmon have all lost more than 35 percent in value since that time.
The Bank of England’s report on Tuesday noted that “valuations in some segments of the market, notably the prime London market, had become stretched.” It warned that any fall in commercial property prices could be “amplified” by investors and real estate funds.
“These open-ended funds could be forced to sell illiquid assets to meet redemptions,” the report noted.
At a news conference following the release of the report, Andrew Bailey, the head of Britain’s financial regulator, said that so-called open-ended real estate funds faced a structural problem, in that their assets did not “revalue naturally” in the market.
Mr. Bailey, the chief executive of the Financial Conduct Authority, said it was “sensible” to suspend all withdrawals, because “we don’t want those who get to the door quickly to get to the door quickly to get a better deal than those that don’t.”
But he conceded that the authorities believed there was a mismatch between funds that invested in real estate, and that there were “issues that we need to look at in the design of these things.”
Officials from the Financial Conduct Authority were to meet with major asset managers on Tuesday to discuss the impact of the “Brexit” referendum, a spokeswoman said.
The news from Aviva and M&G, coupled with Standard Life’s announcement after the markets closed on Monday, weighed on the stocks of several financial services companies with large property funds.
Standard Life’s shares declined 5 percent in afternoon trading in London, while Aviva’s shares were down more than 3 percent. Shares of Legal & General, another British insurer, were off 7 percent and Aberdeen Asset Management also declined 4 percent in afternoon trading.
Shares of British Land Company and Land Securities Group, two big British real-estate investment trusts also declined in afternoon trading in London.