Cap&Reg says property valuations stabilised in Q3

* Says valuations trending higher in Q4

* Says occupancy rises in Q3

* Sees signs of recovery in tenant markets

* Shares up 6.5 pct

Nov 12 (Reuters) - British property fund manager Capital & Regional Plc (CAL.L) said property valuations across its three UK funds had stabilised in the third quarter and were trending higher in the fourth quarter. Capital & Regional, which invests in leisure centres and shopping malls in Britain, said occupancy across its Mall, Junction and X-Leisure funds at the end of the third quarter to Sept. 30 rose to 94.2 percent from 93.6 percent at the end of the half year.

"Increasing signs of transactional activity in the market suggests that this trend may continue, which at least for the next quarter is likely to more than compensate for continuing pressure on income in tenant markets," the company said in a statement. Capital & Regional said there were some signs of recovery in tenant markets in the third quarter, with levels of occupancy broadly stable or increasing, and relatively low levels of new administrations.

However, it remained cautious about the outlook for tenant markets.

"Whilst the slowdown in administrations and the resilience of consumer demand are welcome developments, conditions for retailers are likely to remain challenging into next year," it said.

Capital & Regional shares were up 6.5 percent at 37 pence at 0827 GMT on Thursday on the London Stock Exchange. (Reporting by Kumar Alagappan in Bangalore; Editing by Vinu Pilakkott)