RICS Commercial Market Survey

Sentiment in the commercial market eases further

• Weaker demand and rising availability leads to most
  negative rent expectations net balance since Q3 2009
• Development starts fall further across all sectors of
  the market
• Capital value expectations fall further and surveyors
  expect investment transactions to slow significantly

The latest RICS UK Commercial Market Survey continues to show falling occupier demand and rising availability, which is leading to an increasingly negative rental outlook. Furthermore, surveyors expect the market to stagnate as finance remains tight and tenants become increasingly cautious. In particular, respondents are continuing to express concern regarding economic prospects at home and abroad.

The mood among surveyors deteriorated across all sectors of the commercial market in the final three months of the year, with retail and offices suffering the most. The net balances for both tenant demand and expected rents fell further into negative territory, while available space continues to rise. Demand for industrial space was unchanged as was the supply of space, though rents are still expected to fall in Q1 2012.

The supply pipeline for commercial stock looks weaker, as new development starts eased further for all sectors, most notably for retail units. On the investment side, enquiries for office space fell for the first time in a year and expectations for future transactions also declined. Capital value expectations fell at a faster rate for all sectors.

Significantly, London and the South no longer seem immune to the negativity felt elsewhere in the UK. Indeed, the Central London office market, which had remained buoyant over the first half of the year, saw occupier demand fall for the first time in 18 months. Alongside this, available space is now rising for the first time since Q3 2009, though rental expectations remain broadly stable.