RICS highlights commercial property concerns
“Rental recovery has stalled for the second consecutive quarter as demand for commercial property remains low. Indeed, falling stock markets, worries over the impact of spending cuts and the sustainability of the recovery appear to be creating an air of caution, which is impacting on the commercial property sector,” says RICS senior economist Oliver Gilmartin, commenting on the findings of the RICS Commercial Market Survey for Q3 2010
The survey shows that lettings activity for commercial property again eased in Q3, with the net balance of occupier demand moving to minus 7 in Q3 from minus 9 in Q2. Those surveyed said that uncertainty about government spending cuts had prompted firms to err on the side of caution when it came to making investment decisions.
Sentiment was again the most negative for office property, where the balance fell at the fastest pace of all sectors, while occupier demand for retail premises and industrial property fell at more or less the same rate as in Q2. Enquiries also slipped again in Q3.
Available space increased across the country at roughly the same pace as in Q2, with surveyors reporting the biggest increase in availability in Midlands and the North, while availability broadly stabilised in London and the South. Incentives picked up in all sectors.
Surveyors’ anticipation of weaker growth in tenant demand means the outlook for rents deteriorated further in Q3; 16% more surveyors expect rents to fall in Q4 than expect a rise. Central London office rents stabilised after increasing last quarter and industrial rents in the capital also broadly stabilised; rental expectations dropped elsewhere across all sectors, RICS found. It noted that development starts for office property in Central London increased during Q3 for the first time since the economic crisis began – albeit at a relatively slow pace.
