Demand for retail property continued to fall across London in the second quarter of the year and is now approaching financial crisis-level lows, according to a new survey.
Meanwhile, demand from overseas investors has also continued to drop as Brexit looms, showed the latest commercial market survey from the Royal Institution of Chartered Surveyors (Rics), the industry’s professional body.
Rics’s gauge of the demand for commercial property in London stayed in negative territory for the twelfth quarter in a row. This means more of the 700 chartered surveyors who responded to the survey said demand was falling than said it was rising.
In the latest sign of malaise in the sector, retail was responsible for pulling the overall figure below zero, with a net balance reading of minus 61 on the demand gauge.
By contrast, surveyors reported seeing demand rise for industrial buildings, a large part of which was for warehouse space for online shopping.
Respondents to the survey reported that many firms were looking to relocate at least some of their businesses as Brexit looms and said London was becoming less attractive to overseas investors.
“The overall picture remains little changed across the UK commercial property market in the second quarter,” said RICS economist Tarrant Parsons. He said “the disparity between a strong backdrop for the industrial sector and weakness in retail” was “still very evident”.
The surveyors’ expectations about rent prices for London were broadly unchanged compared with the first quarter, suggesting all-sector rents will dip marginally over the coming months.
Niall Lindsay of London surveyor Lapar said: “The key issue is Brexit. The market is less concerned about whether we remain in or out. It just wants certainty one way or the other which the political classes have manifestly failed to deliver.”
“If we have certainty, the market will adjust accordingly and confidence levels will return.”
Surveyor Jeremy Drax of London firm Parham Holdings said: “Brexit has cast a spell over the real estate sector like many other sectors.”
“The inability of investors to plan financially for taxation and investment returns let alone envisage the re-establishment of any sense of normality and equilibrium in the UK economy, are natural contraceptives to investment and anticipated economic growth.”