RICS COMMERCIAL PROPERTY SURVEY Q2 2009

Tenant demand in the second quarter of 2009 remains low across the East of England but has improved in the office sector. The net balances for new enquiries and confidence were the least negative since the start of the downturn in the third quarter of 2007, according to RICS’ Commercial Property Survey published today (21 July 2009).    

Demand for office space across the region has bucked the national trend by improving slightly to a zero balance, which means surveyors felt demand for office space had neither risen nor fallen this quarter (Q2). The industrial sector remains unchanged whereas demand for retail property has seen a further decrease, with 33 per cent more East of England Chartered Surveyors reporting a fall rather than a rise this quarter, compared to 12 per cent last quarter (Q1).   

Despite this, confidence in the retail sector for the quarter ahead is less negative with fewer Chartered Surveyors reporting a fall rather than a rise, from 56 per cent in Q1 to 22 per cent in Q2. Confidence in industrial property has seen a marked improvement, with two per cent more Chartered Surveyors reporting a rise rather than a fall in confidence, up from the first three months of the year, when 38 per cent more chartered surveyors in the region reported a fall rather than a rise in confidence in the industrial sector.    

New enquiries to occupy business space improved in all sectors in the region. The office sector saw the biggest improvement going from a negative to a positive, with 15 per cent more Chartered Surveyors in the region reporting a rise rather than a fall, compared to 25 per cent reporting a fall rather than a rise during Q1 2009.  

     

The net balance of East of England surveyors reporting a rise in available floor space rose at a lesser pace. The ongoing contraction in the economy and the continuing rise in available floor space have weighed on surveyor expectations for the rental outlook. Surveyors remain pessimistic with 77 per cent more Chartered Surveyors in the region expecting a fall rather than a rise in rents over the next three months in both the industrial and office sectors and 56 per cent in the retail sector.

David Potter, RICS East operations director, said: “Whilst tenant demand in some areas improved modestly compared to Q1, the positive move was from extremely low levels.  It is still unclear whether current activity reflects ongoing rationalisation of space or “fresh” tenant demand. Furthermore, the rental downturn remains in its infancy with strong levels of surveyor inducements pointing to a challenging lettings market.   

“Key to the outlook for the rental market in the coming year will be the speed and duration at which jobs are being shed. Recent data offers some hope that the pace may at least be slowing in response to macroeconomic policy efforts. In the investment market, a growing distinction between prime and secondary has continued with some indications that yields on prime properties may be starting to plateau. Should the labour market stabilise during 2010 then downward pressure on capital values will start to ease.”

RICS member comments from the region:  Robert Houlton-Hart FRICS, of Barker Storey Matthews in Bury St Edmunds, said: "The Arc is now open and trading. This has released a number of shops in Cornhill and Buttermarket where retailers have re-located to the Arc. There are a number of office enquiries and we have let two 4,000 square foot suites with interest in a number of offices. The demand for Industrial and Warehouse space is patchy."   

Jonathan Lloyd MRICS, of Hazell Chartered Surveyors in Bury St Edmunds, said: "The commercial property market remains in a depressed state, although there has been a slight increase in new enquiries."   

David Linnell FRICS, of David Linnell Chartered Surveyors, in Hertfordshire, said: "There has been a flurry of occupier interest for a couple of weeks but that appears to have evaporated. It may be the heat!"   

Mike Phoenix MRICS, of Brown & Lee in Stevenage, said: "There have been more enquiries made for properties however it is too early to say if these enquiries will materialise into transactions."   

Mark Sargeantson FRICS, of Fenn Wright in Ipswich, said: "Very low level of development activity due to low demand across all commercial sectors"