Commercial Property downturn continues
RICS COMMERCIAL PROPERTY SURVEY Q1 2008
PR026
The balance of surveyors reporting demand for commercial property in Q1 has fallen at the fastest pace for over six years and rental confidence has fallen at the fastest pace for a decade, says RICS’ Commercial Property Survey published today (19 April 2008).
30 percent more Chartered Surveyors reported a fall than a rise in demand compared to 15 percent in Q4 2007. All sectors reported a fall for the second consecutive quarter with the retail sector showing the largest decline, dropping to the lowest balance in the survey’s history. 40 percent more Chartered Surveyors reported a fall than a rise in retail demand, compared to 27 percent. 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 second consecutive month and at a faster pace. Financial turmoil 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 percent more Chartered Surveyors reported a fall than a rise in new enquiries for offices compared to only 13 percent.
The supply side of the market has loosened considerably, although it is too early to tell whether the influx of new property onto the market is the result of a deteriorating business climate or an attempt to avoid the empty property tax which recently came into effect. Available space rose in the office sector for the first time in four and a half years while available retail and office space rose at the fastest pace on record. Industrial properties appear to have been particularly affected by the changes to the empty tax regime leading to a record increase in available space in the sector.
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. Also, surveyors now expect rents to fall in both the office and industrial sectors whilst in the retail market declines in rents are expected to double in the coming quarter.
Commenting, 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.’’
ENDS.
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 140,000 members globally and represents, regulates and promotes the work of 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).
Notes for Editors:
RICS Market Surveys
The Commercial Market Survey was first polled in Q1 1998
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