The slowdown in occupier take-up that has characterised the past year has stabilised, but the fortunes of property sub-sectors have diverged dramatically. Nationally, 14% more chartered surveyors saw a rise in demand for office space than a fall in the third quarter, while in retail, 14% more reported a fall than a rise.
The picture in central London is even more pronounced with a balance of 25% of chartered surveyors seeing a rise in office demand but a hefty 46% seeing a fall for retail premises.
Confidence in the retail sector is also at its lowest since the beginning of the Iraq war with 38% of chartered surveyors expecting further downturns in demand.
Continued demand for office space is being sustained by growth in business and financial services activity. An improved manufacturing sector and buoyant investment in distribution services is bolstering industrial property demand. Further rent rises are expected by surveyors in both areas.
The August interest rate cut may offer relief to the retail industry and allow the industrial sector to continue prospering.
RICS economist, Milan Khatri, says:
‘The retail property sector has keenly felt the impact of the slowdown in house prices and weaker consumer spending. However, other parts of the service sector have continued to grow and this is supporting investment in both office and industrial floor space.’
