Shares in Morgan Sindall, owner of Salford Quays-based Muse Developments, fell 20% today after it joined the ranks of property groups hit by the adverse market.
In a trading update for the six months to 30 June 2008, the group said trading was "increasingly challenging", especially in the commercial property and affordable housing sectors.
The company said performance would be protected by existing orders in 2008 but damage was likely in 2009.
The diverse group has several divisions including construction, fit out, infrastructure and housebuilding. The urban regeneration division is made up of Muse, formerly Amec Developments, which was acquired in July last year.
Of Muse's performance, the board said: "Despite the uncertain economic conditions urban regeneration is performing in line with expectations for 2008 as a result of existing commitments in its order pipeline.
"It has also made progress with its four projects currently at preferred bidder stage. The division focuses on long term strategic partnership arrangements with public and private landowners, which limits its exposure to the revaluation issues affecting the sector.
"However, with the softening of commercial property investment over the last 12 months the outlook for the division remains cautious."
Muse's major ongoing mixed-use projects include St Paul's Square in Liverpool, through the English Cities Fund joint venture, Talbot Gateway in Blackpool and Victoria Station in Manchester.
Morgan Sindall added that affordable housing, run through the Lovell brand, had also been hit by tough market conditions, though not entirely. The refurbishment and new build social housing sectors remain healthy, it said, but the division's open market house sales are being heavily impacted by mortgage availability.
The statement said: "Consequently the volume of open market house sales for 2008 is expected to be around half the level achieved last year when it accounted for 6% of group revenue. The division is responding to market conditions by reducing production costs, focusing on new build social housing, and switching units designated for open market sale to social housing.
"We remain of the view that mixed tenure regeneration is central, in the medium and long term, to the regeneration of social housing in the UK. However the division will continue to be impacted in 2009 by the deteriorating condition of the housing market currently being experienced."
Shares in the group were down 20%, by 153p at 595p by lunchtime, valuing the business at £321m. This time last year the business was worth three times that.