By Jennifer Hill, Personal Finance Correspondent

LONDON (Reuters) - Billions of pounds have been flowing out of commercial property funds as investors desert a sector that went into freefall when the global credit crunch exacerbated the onset of a cyclical decline in property prices.

The mass exodus has seen a growing band of fund managers shut the door on new withdrawals to ensure that the high level of redemption requests does not force property sales.

Some analysts, however, are calling the bottom of the market, and say there are now bargains to be had.

It begs the question: is there currently value in property?

And are property shares -- which investors are, of course, free to buy and sell at will -- a better bet than funds that invest in actual bricks and mortar, with their intrinsic illiquidity?

Total returns from commercial property fell 3.7 percent in December -- the worst performance for 20 years -- according to latest statistics from the IPD index, the key industry benchmark.

UK pooled property funds saw a 9.1 percent drop in total returns in the last quarter of 2007 -- the lowest figure since the index began in 1990 -- and annual returns were down 6.7 percent, their weakest since the last property slump in 1991.

As performance nosedives, investors have been clamouring for the exit -- a major contributing factor to New Star's shock profit warning earlier this month, which sent its share tumbling more than 30 percent.