Demand for London office space jumps

OPTIMISM about the UK commercial property market is at its highest level since the onset of the credit crunch, thanks to a rebound in demand for central London offices, according to the Royal Institute of Chartered Surveyors (RICS).

In the fourth quarter, 18 per cent per cent more surveyors said they expected new sales and lettings to increase rather than fall in the next three months, up from eight per cent in the third quarter. This is the highest reading since the onset of the credit crunch in the first quarter of 2007.

And more businesses appear to be planning to expand, after eight per cent more surveyors reported a rise in occupier enquiries in the fourth quarter, compared to a balance of -22 per cent in the three months previously.

Tenant demand for commercial property stabilised overall in the fourth quarter, RICS said, with a net balance of zero against -6 per cent in the earlier quarter.

Demand for office space was strongest, with a net balance of zero surveyors reporting available space – the lowest number since the fourth quarter of 2007. In central London, 42 per cent more surveyors recorded an increase in demand rather than a fall, up from 25 per cent in the third quarter.

However, empty space continued to tick up in the industrial and retail sectors, with a balance of +5 per cent and +4 per cent respectively.

But even as demand stabilises, the outlook for rents is poor. Though the outlook for London offices is more positive, retail rents are expected to decline in all regions of the UK, while industrial rents are expected to decline everywhere but London and the South East.

Overall, seven per cent more surveyors said they expected rents to fall rather than rise.

The expectations are that rents will continue to decline in the Midlands, North and South, while they are expected to rise in London.