Demand Down to Rent a Commercial Property

publication date: Jan 23, 2012
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books

Demand Down to Rent a Commercial Property

RICS say Outlook for Commercial Property Hit by Economic Uncertainty


The RICS, one of best UK housing economic departments has produced its independent view of the commercial market. Falling occupier demand and increasing availability drove down commercial property rental expectations in the final quarter of 2011, says the RICS UK Commercial Market Survey (11th January 2012).

The RICS survey states that overall tenant demand continued to fall in the final three months of last year, with 13 per cent more surveyors reporting decreases rather than increases in interest from prospective tenants. Notably, demand for commercial space in London also began to waiver for the first time in over a year.

The survey went on to say that falling demand and rising availability continued to impact on overall rental expectations which weakened over the quarter, moving further into negative territory (-29 per cent). The more adverse trend was visible in all parts of the UK with the headline rent expectations net balance even in London recording a negative result. However, the report suggests that rents are still projected to nudge up in the capital's prime office sector.

Perhaps unsurprisingly, inducements continued to increase in the three months to December as landlords attempted to attract potential tenants. 25 per cent more respondents reported rises rather than falls in incentive packages, the highest reading since Q4 2009. Surveyors report that in this difficult market, many would-be occupiers are requesting reductions in rent and higher inducements

Simon Rubinsohn, RICS Chief Economist, said: "Rental expectations have predictably become a little more negative in the face of the recent run of grim economic news. While this seems to be the case across almost all of the UK the one area that continues to buck the trend is prime London offices. However even here our indicators suggest that demand for space is a little less strong than it was. Meanwhile, the on-going shortage of mortgage finance is set to dampen investment activity."

The full RICS Q4 2011 Commercial Market Survey can be read here.

If you're struggling to let a commercial property, you could look to convert it for residential use? Take a look at Kate Faulkner's Top Tips for Converting Commercial to Residential Property


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