London heads UK commercial property market recovery says upbeat report from surveyors
London is leading the commercial property market recovery in the UK with the majority of surveyors reporting rising enquiries and lettings activity for the first time in over 2 years, according to a report from the Chartered Institution of Chartered Surveyors.
Retail and office demand are moving into expansionary territory at a faster pace than elsewhere, the report shows. Central and Greater London office markets saw tenant demand rise for the second consecutive quarter and at more than double the pace of the previous survey period.
Some 42% more chartered surveyors reported a rise than a fall in lettings activity in Central London compared to 18% in the previous quarter, the highest figure since the first quarter of 2007, RICS says.
Across the UK as a whole, the net balance for tenant demand has risen to 8% from a negative reading of 11% in the previous quarter.
But the report warns that despite the improvements in demand, rental expectations have yet to turn positive although the latest survey does point to a sharp deceleration in the likely pace of rental declines across all three sectors in the run up to Christmas.
The report predicts that in the Central London office market only modest declines in rents are expected into the fourth quarter. For the time being, greater lettings activity continues to be supported by rising levels of inducements which rose at a similarly firm pace across all three sectors in the third quarter.
But the outlook is positive. Near term indicators continue to point to an ongoing improvement in the fourth quarter, RICS says.
‘New enquiries to occupy business space have turned positive for the first time since the downturn got underway and it is the first time in five years that enquires have risen in unison across all three sectors,’ the report points out.
It adds that confidence towards the outlook for lettings activity has perked up across all three sectors with the biggest rise in confidence in the office market followed by the industrial sector.
‘The results may provide the first signal that a strengthening in the global economy has filtered into multinational lettings activity, particularly for Central London offices where the veil of pessimism towards the outlook for rents is slowly lifting,’ said an upbeat Oliver Gilmartin, RICS senior economist.
‘Industrial lettings demand is also gaining some support from the improved economic backdrop.
The laggard remains the retail sector where surveyors expect little improvement in tenant activity in the run up to the crucial Christmas trading period,’ he added.