Tenant demand in Derbyshire has fallen at the fastest pace for over six years with rental confidence falling at the fastest pace for a decade, says RICS' Commercial Property Survey published this week.

In Q1, 30 per cent of Chartered Surveyors reported a fall in demand compared to only 15 per cent in Q4 2007. The commercial, office and retail sectors all reported a fall for the second consecutive quarter with the retail sector showing the largest decline at 40 per cent (compared to 27 per cent in Q4.)

The continuing credit turmoil and a slowing housing market seem to be weighing heavily upon both retailers and consumers confidence. 

New occupier enquiries also fell for the second consecutive month showing that current financial instability has impacted upon decision making in the business community with many re-evaluating their demand for commercial property space. Unsurprisingly, the office sector has been the worst hit area. 35 per cent of Chartered Surveyors reported a fall in new enquiries for offices compared to only 13 per cent in Q4.

Looking forward, surveyors continue to be pessimistic. Confidence in activity fell across all sectors with confidence in retail activity falling to the lowest level on record.

In addition, it is expected that rents will fall in both the office and industrial sectors while rents in the retail market are expected to decline twice as much during the coming quarter.

East Midlands-based chartered surveyor and RICS member, Andy Hey, said: “The great pity in all of this is the lemming-like rush away by the lending banks that have currently turned into the non-lending banks.  The business sector unfortunately relies on the banks and the latter are disappointing a lot of customers just now.

“Difficult to forecast improvement until the banks actually settle their nerves and welcome their customers back.  We believe there is business to be done and people are not as nervous as the survey suggests - it is simply the inability to obtain loans on reasonable terms that has brought us to this position.”

Simon Rubinsohn, RICS chief economist said: "The drop in tenant demand is a particularly worrying development. This raises the possibility that rental growth will continue to weaken as the level of inducements are raised in a bid to keep property occupied.''

"The underlying softness in the market will not have been helped by the ending off the tax relief granted for empty property. However while commercial property is likely to remain under some pressure for a while to come, from an investment standpoint yields are now approaching levels where they are beginning to offer some value.''