Confidence in commercial property


Investors and prospective tenants have been scared off the commercial property sector by the recent turmoil in the credit markets, a new report claims.

A survey from the Royal Institute of Chartered Surveyors (RICS) reveals that the market could be on the verge of its first collapse since the early 1990s – as commercial property agents report that retail and office space demand is at its lowest level for four years.

One per cent more chartered surveyors reported a fall, as opposed to a rise, in demand – the first time the balance has turned negative since 2005.

"The turmoil in the credit market is being most acutely felt in commercial property as the sector is more dependent on capital market funding than in the past," Simon Rubinsohn, chief economist at the RICS, said.

"Business expansion has been put on hold in the short term with the near term outlook for rents weaker as a result.

"Fears of the impact of the credit crunch have made investors retreat to the margins as confidence in returns diminishes. Sentiment in the market is at the lowest point in four years and is unlikely to improve in the short term," he added.