RICS says tenant demand fell in Q2
It’s Friday! Time for a bit of gloom. Today brought to you by RICS, which says demand from tenants for commercial property fell in the second quarter – the first decline in a year. This has of course boosted the rumblings of concern that the recovery in the UK commercial property market may already be running out of steam.
In total, 7% more chartered surveyors reported a fall than a rise in tenant demand during Q2, compared with a positive 6% reading for the RICS Commercial Market Survey for Q1. This is the first negative reading since Q1 2009, RICS points out.
RICS says demand for offices showed the sharpest drop in London during Q2 – contrast this with all the recent reports of rising rental rates thanks to a scarcity of available prime office space. In total, 38% more chartered surveyors told RICS that they had seen a fall than a rise in office demand, compared with a positive 32% reading in Q1. Those surveyed reported that uncertainty about the extent of cuts announced in the Budget had weighed on investment decisions.
Demand in retail and industrial markets all fell across most regions, although RICS says the north of England is bucking the trend, reporting continued strong demand for both retail and industrial property. (Contrast this with recent comments from CBRE).
More survey respondents reported a fall than a rise in enquiries, with the net balance falling to -10 from +7 in Q1. Consequently, confidence in the outlook for lettings has also fallen for first time since Q2 2009, with the balance at -7. Confidence towards future lettings of office and industrial property in London fell to -19 and – 31 respectively. While confidence towards retail lettings remained subdued overall, in Central and Greater London, surveyor confidence improved from -58 to –7, RICS noted.
The availability of space for occupation picked up, driven by increasing space in the North and Midlands regions. Available space increased at slower pace in the South, while it broadly stabilised across all sectors in London, the institute added.
Meanwhile the Telegraph has reported that banks are poised to offload around £50bn of property from their balance sheets while development finance for new buildings is still in short supply – and new regulatory controls are about to change the dynamics of the commercial property market by constraining speculation, it adds.
