Demand for commercial property has held up surprisingly strongly as business confidence has dropped, but is likely to weaken as the year goes on, claims the latest CBI/GVA Grimley Property Trends Survey.

‘Business is much less optimistic about the future, which is a warning signal for the property market,’ said Sudhir Junankar, CBI associate director of economic analysis.

But insiders will be relieved that 27% of businesses interviewed still expect to increase property holdings over the next six months, compared with 15% anticipating contraction. This shows little deterioration in the trend since the surveys were started in 1994.

‘Property is holding up reasonably well, bearing in mind the economic uncertainties,’ said Stuart Morley, head of research at GVA Grimley.

He pointed out that property lags the economy by six to nine months, so he expects a weaker picture when the next survey appears in the summer. But no one expects a collapse. ‘Interest rates should come down to 5.5% by then to ease any downturn,’ said Junankar.

Property rationalisation is mainly a feature of larger companies, while growth is strongest among those with less than 2000 staff.

One optimistic point is that occupiers will pay good rents for the right property but are constrained by lack of supply, said Roger Waddams of GVA Grimley.

Also, firms not expecting to increase their property holdings still expect to move or refurbish, offering continuing turnover for the sector during any downturn.