The latest RICS survey showed that office and retail occupier activity improved significantly in Q1 and that respondents were more positive about the prospects for property over the next 12 months. But the economic environment has deteriorated since then, dampening prospects for the sector.

According to the survey, the net balance for occupier demand rose from 16% in Q4 to 32% in Q1. Offices made the biggest improvement, as the balance increased from minus 3% in Q4 to +30% in Q1. Retail rose to 0% from minus 23% in Q4. Meanwhile, industrial demand remained the strongest, albeit the balance was unchanged at +60%.

The outlook for rental growth over the next 12 months was perceived to have improved further. This was mainly driven by a more optimistic outlook for prime offices, with the net balance rising from +18% to +42% in Q1. The retail balance also improved but remained deep in negative territory, indicating that the sector is not expected to return to positive rental growth in the short term. The outlook for industrial still points toward robust rental growth.