Commercial Property downturn intensifies

RICS COMMERCIAL PROPERTY SURVEY Q2 2008

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The balance of surveyors reporting demand for commercial property in Q2 has fallen to the lowest level in a decade, says RICS’ Commercial Property Survey published today (19 April 2008).

50 percent more Chartered Surveyors reported a fall than a rise in demand compared to 31 percent in Q1 2008. All sectors reported falls for the third consecutive quarter with the retail, industrial and the office sectors dropping to the lowest balance in the survey’s history. The worst hit area continues to be the retail sector with 64 percent more Chartered Surveyors reporting a fall than a rise in retail demand, compared to 42 percent in Q1. The continuing credit turmoil and a slowing housing market is clearly weighing upon both retailer and consumer confidence.

New occupier enquiries also fell across all three sectors for the third consecutive month. Financial uncertainty has impacted upon decision making in the business community with many re-evaluating their demand for commercial property space. 54 percent more Chartered Surveyors reported a fall than a rise in new enquiries for offices compared to 36 percent in Q1.

The supply side of the market is still loose 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 and to a record high. 50 percent of surveyors reported a rise than a fall in available office space in Central London compared to 4 percent in Q1.

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

Commenting, 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 down ward spiral and evidence suggests that 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.”

About RICS

RICS (Royal Institution of Chartered Surveyors) is the mark of property professionalism worldwide. It covers all aspects of property, construction and associated environmental issues. RICS has 86,000 chartered members (FRICS and MRICS) and 55,000 members in other categories of membership (TechRICS, trainees and students) globally. It represents, regulates and promotes the work of these property professionals throughout 146 countries. RICS is governed by a Royal Charter approved by Parliament which requires it to act in the public interest. It is also a professional regulatory body approved by Government (HM Treasury). Visit www.rics.org/press

Notes for Editors:

RICS Market Surveys

The Commercial Market Survey was first polled in Q1 1998

Stephen Thornton
Senior Press Officer
RICS Corporate Communications
T:  +44 020 7695 1682
M:  +44 07969 177150