Demand for commercial property is at a ten-year low after months of credit turmoil, weakening consumer confidence and occupiers’ freezing expansion plans said the RICS in a report published today
The RICS’ Commercial Property Survey said demand for property in the second quarter of the year had fallen to its lowest level in a decade with more than 50% of surveyors reporting a fall.
It said demand had fallen in all commercial property sectors for the third consecutive quarter with the retail, industrial and the office sectors dropping to the lowest balance in the survey’s history.
Retail worst hit
The worst hit area continues to be the retail sector with 64% more surveyors reporting a fall than a rise in retail demand, compared to 42% in the first quarter of the year. The RICS said: ‘The continuing credit turmoil and a slowing housing market is clearly weighing upon both retailer and consumer confidence.’
It said occupiers were beginning to re-evaluate their demand for commercial property space with 54% more surveyors reporting a fall than a rise in new office enquiries compared to 36% in the first quarter. The report said that surveyors continue to be pessimistic with confidence in activity and rental expectations falling across all sectors to the lowest levels on record.
Drop in tenant demand
The RICS also said the survey showed that available office space in Central London had risen at the fastest pace in the survey’s history to a record high with 50% more surveyors reporting a rise rather than a fall in available office space in Central London compared to 4% in the first quarter.
Simon Rubinsohn, RICS chief economist said: ‘The drop in tenant demand is indicative of the increasing pressure on business while the wider economic impact is starting to be felt in the drop in consumer confidence.
‘Rental growth is on a down ward spiral and evidence suggests that the levels of inducements are on the increase as landlords attempt to keep property occupied. The picture is looking depressed in the near term but investors are seeing yields begin to reach levels which will offer decent returns.’