With international stock markets experiencing volatile mood swings many investors are looking to property as a safe haven for their money.

Commercial property companies say new groups of investors, with no past experience of the property market, have been behind some of the smaller commercial deals of the past few months in Dublin and other cities.

The investors form small consortiums to pool their money and buy expensive properties which can provide large returns.

Most observers believe commercial property prices are far from peaking and there is potential for further strong capital growth throughout the sector.

However, as one property adviser said: "Investors have to be able to take the pain, as well as the gain" and locking up your money for between 10 and 15 years is a sacrifice you may have to make to get the larger returns.

As long as the commercial property market is "tenant driven" there will not be any collapse in value, according to auctioneering firms. In other words, as long as commercial developments are only built on the back of demand from occupants, rather than demand from investors, there should not be a price slump.

"Unlike the housing market, where rents cannot keep up with purchase prices, commercial property rents are high but are closer to the building's true value," says Mr James Meagher, head of the industrial property section of DTZ Sherry FitzGerald.

The Bacon report has played a part in turning the occasional inner-city apartment buyer into a commercial property investor. Following the report's publication, the Government introduced legislation which means that residential investors can no longer write off rental income against tax, which has made them look to the commercial market instead.

"We are seeing a lot more smaller investors coming into the market, who have made their money in the residential area and are now using it, as part of a consortium, to buy smaller industrial and office properties," says Mr Meagher.

The professional classes are the ones becoming commercial property investors, according to Mr Michael Gilmartin, associate director with Irish Intercontinental Bank (IIB), which is involved in the financing of many property deals for smaller consortiums.

He says half the bank's commercial property client base, built up in the last four years, are new investors which have not dealt with the bank on any previous occasion.

"We deal with doctors, solicitors and accountants who are banding together to form syndicates all the time," he adds.

The decision to reduce Capital Gains Tax (CGT) from 40 per cent to 20 per cent in last year's budget has also made a difference. People who have been sitting on properties for years are now taking advantage of the tax cut and this is partly the reason behind the flood of commercial property which has come on the market this year. The chance of the next Government reversing the CGT cuts means investors see this as an opportunity which may not come again, according to Mr Meagher.

Another reason for the rise in the number of prospective commercial property investors is that many of them have been unable to access suitable BES schemes.

The changes in the last budget which reduced the amount a company could raise under BES arrangements from £1 million to £250,000, means that traditional BES investors are now looking for an alternative investment vehicle.

However, the smaller investor must bear in mind the high entry costs of getting involved in the property game. Most people in the industry say you need at least £100,000 to buy any decent-sized piece of commercial property as part of a consortium.

If more than 20 people are involved in a consortium, it is no longer regarded as a partnership and this means the participants either form themselves into a company or a unit trust.

This means that large-scale consortiums - involving between 50 or 60 people - cannot be formed under current legislation. However, some consortiums have found a way around this by breaking up the consortium into smaller groups who then take ownership of different parts of the same property.

Regardless of the composition of the consortium, if the required money is raised the returns can be impressive, according to Mr Ronan Webster, of Gunne Commercial Property.

He cites an example of a syndicate or consortium putting in £400,000 (four people investing £100,000 each) into a 6,000-square foot retail warehouse unit on the outskirts of Dublin. In addition to the £400,000, there is £800,000 in borrowings (at 7 per cent per annum) and costs of £100,000, making a total investment of £1.3 million.

He assumes an initial rent of £15 per square foot and a 6 per cent annual rise in rent, yielding total income of £1.5 million. In 10 years he predicts that "conservatively, the building would fetch £2 million".

Allowing for fees of £75,000 and capital gains tax of £120,000, the investment would pay off borrowings, replace the original equity and leave a tidy profit of £755,000 split between the four investors.

He says these figures are a "worst-case scenario" and a likely sale price for such a unit would be £4.3 million and stronger rental income growth would mean the investment returning a profit of £2.7 million.

However, under this example the entry cost is still £100,000, which would be beyond the means of most people unless they come in for an unexpected windfall. Also the members of the consortium must accept that £100,000 of their money is tied up for 10 years.

Mr Webster says that some small investors are "scared off" at the thought of investing such large sums when they are liable if the borrowings cannot be paid back.

Although this is the case with any regular mortgage, people investing their savings in commercial property, as opposed to a home, tend to be more apprehensive about the arrangement, he says.

For some of the largest deals - where four or five wealthy individuals combine - some banks will offer "non-recourse lending". In other words they will not seek a contract where the borrowers are liable for all outstanding debts.

The banks in this case have the right to the property involved if the loan is defaulted on, but agree to forfeit their right to pursue the borrowers for any shortfall between the property's value and the loan outstanding.

Many auctioneering firms and estate agencies favour the wider introduction of non-recourse lending in the commercial property market, but banks are not likely to extend this liberty to anyone but the largest and wealthiest of investors.

There is a problem if you are part of a property consortium and you suddenly need your money. Generally, the partners in a commercial property consortium will agree to hold the property for a set period, normally between seven and 15 years.

However, problems can arise if one of the partners needs the money before this. Many agreements involve expensive "get-out clauses" which mean that stiff penalties can whittle down the original lump-sum invested.

Entering into a consortium is for people "who can afford to think long term", says Mr Liam Lenehan, investment director with Hamilton Osborne King.

"The other partners to the agreement will want to know that you are prepared for the long haul and can afford to have your money tied up that long," he says.

In terms of the options available, prime office blocks in the main cities are the most popular and rewarding for investors, with annual rental growth for industrial buildings in Dublin, for example, running at about 10 per cent, according to Gunnes.

Yields in Dublin are running at about 5.5 per cent for prime sites, while secondary buildings have yields of about 7.8 per cent. A retail outlet in Grafton Street for instance would currently command a yield of about 3.5 per cent, according to Mr Meagher.

He says retailing is becoming a particularly popular option for investors, with smaller shops being the main target.

Industrial units are also increasing in value, he says. Last week, an investor paid one of the highest prices recorded for an industrial unit in the Dublin area. The deal represented £110 per square foot and was paid for the old Dexion plant close to the Square shopping centre in Tallaght. A few years before that the same building made £85 per square foot.

Pubs are not normally a popular commercial property investment for anyone but publicans. According to Mr Gilmartin they are seen as too risky and do not produce rents on the same scale as office buildings.

Despite this, Irish investors have been buying pubs in Britain which can be bought relatively cheaply, as breweries move out of the pub trade. Hotels are also a popular property option, particularly those in tax designated areas.