UK funds house F&C Asset Management will merge its property business with a London-based specialist to create a £8.5bn (€10.7bn) company focused on the UK and Europe, in a deal that comes after months of falling property values and investment returns in the UK and concern that European markets could follow suit.

According to a statement published today, F&C will merge its £5bn property arm with Reit Asset Management, which manages £3.5bn of assets. F&C will own a 70% stake in F&C Reit Asset Management while Reit's owners will hold 30% of the new business.