Demand for commercial property hits record low

Jul 30 2008 by Aaron Boland, Liverpool Daily Post

THE level of demand for commercial property in the second quarter of this year fell to its lowest level for more than a decade, a new report reveals.

The latest commercial property survey from the Royal Institution of Chartered Surveyors (RICS) shows a grim picture across the country.

The survey shows 50% more chartered surveyors reported a fall rather than a rise in demand compared to 31% in the first quarter of the year.

All sectors reported falls for the third consecutive quarter with the retail, industrial and office sectors dropping to the lowest balance in the survey’s history.

The worst hit area continues to be the retail sector with 64% more chartered surveyors reporting a fall rather than a rise in retail demand, compared to 42% in the first quarter.

The continuing credit turmoil and a slowing housing market is clearly weighing upon both retailer and consumer confidence, the RICS says.

New occupier enquiries also fell across all three sectors for the third consecutive month. Financial uncertainty has affected decision making in the business community with many re-evaluating their demand for commercial property space.

It reports 54% more chartered surveyors reported a fall rather than a rise in new enquiries for offices compared to 36% in the first quarter.

The supply side of the market is still loose, it adds, with all three sectors feeling the depressing effects of the continuing climate of financial uncertainty.

Available office space in central London rose at the fastest pace in the survey’s history to a record high with 50% of surveyors reporting a rise rather than a fall in available office space in central London compared to 4% in the first quarter.

Looking forward, surveyors continue to be pessimistic. Confidence in activity and in rental expectations fell across all sectors to the lowest levels on record.

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 downward spiral and evidence suggests 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.”

tonymcdonough