Headlines:

• All sectors of the market cool further, but the industrial sector outperforms retail and offices on a relative basis
• Demand falls, availability increases sending rental expectations even lower
• Investment demand falls away at a similar pace sending capital values lower across all sectors

Activity across all sectors of the commercial property market fell further in England and Wales in the third quarter, with all but one of the headline indicators deteriorating further.

The market downturn currently underway has hit confidence nationwide and coincides with an economy which is falling into a broad-based recession.

Occupier demand declined at the fastest pace in the survey’s history (1998).

This was also true at the broad regional level.

Meanwhile, enquiries to occupy space declined at the fastest pace on record which bodes ill for the near-term outlook for lettings activity.

From a sectoral perspective, new occupier enquiries and demand fell fastest in the retail market, followed by offices and then industrials.

The amount of available floor space for occupation increased at the fastest pace since the introduction of the question in 1999.

Given the pick up in availability, the value of inducements offered by landlords to new tenants to secure a letting, increased further and remains at a record high.

The sharpest pick-up in available space was reported in the retail sector which also witnessed the most dramatic fall off in enquiries during the quarter.

The most negative rental outlook was recorded in the Central London office market where inducements are rising rapidly.

Surveyors across most regions have generally lowered rental expectations as an increasing sense of pessimism has taken root.

As such, confidence in the outlook for rents fell to the lowest level in the survey’s history (1998).

This was generally the case at a regional level.

From a sectoral perspective, rental expectations are lowest in the office sector, followed closely by the retail and then industrial market.

Tenants are firmly in the driving seat and have greater bargaining power pushing lease lengths down at the fastest pace on record.

Confidence in the outlook for occupier demand remains weak at close to record lows and is lowest in the retail sector in the run up to Christmas, followed by the offices and then industrials.

In the investment market, activity remains depressed with investment demand for prime property falling at a similar pace across the sectors in the third quarter at –79 compared to –81 in Q2.

Capital values declined at a similar pace across all three sectors with the weakest declines in industrial –61 compared to –72 for offices and - 73 for retail property.

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