Commercial property tenant demand falls in UK for first time in a year, report shows

Demand fell in the commercial property sector with 7% more chartered surveyors reporting a fall than a rise in tenant demand in the second quarter, down from a positive 6%, and the first negative reading since the first quarter of 2009, the report shows.
 
Tenant demand for offices declined across all regions with London seeing the biggest fall in sentiment with 38% more chartered surveyors reported a fall than a rise in office demand from a positive 32% in the first quarter of the year.
 
Surveyors report that uncertainty over cuts in the budget have weighed on investment decisions. Demand in the retail and industrial markets also fell across most regions although the north is bucking the trend. Demand for both retail and industrial property remains strong in the region.
 
More survey respondents reported a fall than a rise in enquiries, with the net balance falling to -10 from +7 in the first three months of the year. Consequently, confidence in the outlook for lettings has also fallen for first time since the second quarter of 2009, with the balance at -7, the report says.
 
Confidence towards future lettings of office and industrial property in the capital 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.
 
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.
 
‘Surveyors have indicated that uncertainty as to the detail of budget cuts are weighing on firms’ investment decisions with respect to their property requirements. As a result, the rental recovery is stalling in its tracks on waning demand. It seems difficult however to reconcile the turnaround in the London market purely on domestic concerns,’ said Oliver Gilmartin, RICS senior economist.
 
‘Indeed, falling stock markets, worries over both the Euro zone debt crisis and the sustainability of the recovery appear to be weighing on occupational demand from large multinational occupiers,’ he explained.
 
‘Investment demand has also fallen back for the first time in a year with some indication that prices are declining again outside the Central London office and retail sectors,’ Gilmartin added.