Tenant demand for commercial property fell for first time in over a year - most notably in London, according to the latest RICS’ UK Commercial Property Survey.

7% more chartered surveyors report a fall than a rise in tenant demand in the second quarter, down from a positive 6% – the first negative reading since the first quarter of 2009. Tenant demand for offices declined across all regions with London seeing the biggest fall in sentiment. 38% more chartered surveyors reported a fall than a rise in office demand from a positive 32% in Q1. Surveyors reported that uncertainty over cuts in the Budget have weighed on investment decisions. Demand in the retail and industrial markets also fell across most regions, although the North is bucking the trend as demand there for both retail and industrial property remains strong.

The availability of space for occupation picked up, driven by increasing space in the North and Midlands regions. Available space increased at slower pace in the South, while it broadly stabilised across all sectors in London.

Oliver Gilmartin, RICS senior economist said: “Surveyors have indicated that uncertainty as to the detail of budget cuts is weighing on firms’ investment decisions with respect to their property requirements. As a result, the rental recovery is stalling in its tracks due to waning demand. It seems difficult however to reconcile the turnaround in the London market purely on domestic concerns.

“Indeed, falling stock markets, worries over both the Euro zone debt crisis and the sustainability of the recovery appear to be weighing on occupational demand from large multi-national occupiers.
“Investment demand has also fallen back for the first time in a year with some indication that prices are declining again outside the Central London office and retail sectors.”