A LACK of demand in commercial property will bring rents further down, according to survey data released by the Royal Institution of Chartered Surveyors (RICS) today.
Eleven percentage points more of those surveyed expected rents to fall over the next quarter, than thought rents would rise – but this was the most optimistic result since the second quarter last year.
This continued decline came from a double whammy of falling demand and a glut of available property.
“Unsurprisingly, with the retail sector still struggling to find its feet, fewer companies looked to take on new premises last quarter and, consequentially, the amount of empty floor space continued to rise,” said Simon Rubinsohn at RICS.
Even London was hit by decline in the market – with its net balance hitting a two year low – but demand for prime office space held up well.
“Of particular note was the downturn in demand that was seen in London,” Rubinsohn commented, “The capital has typically managed to keep its head above water better than most other parts of the country – but interest from occupiers... fell last quarter.”
Anecdotal evidence from respondents put the demand decline down to a combination of the poor macroeconomic climate and Olympics-related difficulties.
“With the general economic malaise, coupled with the Olympics and summer holidays, the markets remain sluggish,” said John Kent, a surveyor in the West End.
“The office market remains subdued in the core,” agreed Christopher Burrows, also a surveyor in the West End.
But London surveyors expressed hope that a slowly reviving economy and the end of summer distractions could bring recovery.