According to the Royal Institution of Chartered Surveyors’ (RICS) latest commercial property survey, tenant demand has fallen to a level that hasn’t been seen since 2003.

Surveyors have reported a sharp fall in demand for commercial property in Q4 2007 with a balance of -12% more chartered surveyors reported a rise than a fall in demand compared to a balance of -2% in Q3 2007.

All sectors reported a fall for the first time since the first quarter of 2003. The number of surveyors that reported a decline in office demand also moved into negative territory for the first time in over four years, but the biggest decline was in the retail sector as demand fell at its fastest pace in six years.

“Pessimism regarding the near-term economic outlook has started to make serious dents in market sentiment as surveyors start to see the previously strong office sector join the retail market in decline”, said Simon Rubinsohn, RICS chief economist. “While finance remains scarce, commercial property’s continued reliance on capital funding could see the market dip further.”

New buyer enquiries also fell across all three sectors. The retail sector witnessed the sharpest decline in enquiry levels, with the greatest declines in central London and Wales. As for demand for office space, the number of surveyors reporting a fall in enquiries increased to the worst level since the first quarter of 2003, the survey said.
Looking forward, surveyors continued to be pessimistic as a bleaker outlook is anticipated across all sectors.