The cooling economic climate has seen overall demand for commercial property stall. according to the latest figures from the Royal Institution of Chartered Surveyors (Rics).
The society says the second quarter of 2005 has seen a decline in business demand as companies become more cautious about their financial outlook. But the office market is rising supported by continued expansion in the business services and financial sectors. Retail and industrial property demand though, being more exposed to the fluctuations of the UK economy, is falling.
The report says higher interest rates and a sustained slowdown in consumer spending over the last 18 months have contributed to lower demand for retail property. Output from the manufacturing sector has also continued to contract during the second quarter of 2005, while earlier support for industrial demand from the wholesale distribution sector has also slowed.
That said the amount of available commercial property coming onto the market has fallen and surveyors are reporting more use of incentives among landlords in order to secure tenants.
Graham Chase, vice president of Rics, says: “Investment appetite for real estate is being fuelled by low interest rates and is drawing more and more from private individuals and institutional investors. But businesses are currently less inclined to take on new space, a clear signal that firms are more hesitant about expansion plans in the current economic climate.”
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