Tenant demand for commercial property has tumbled to 2003 levels, according to the latest RICS Commercial Property Survey.
Surveyors yesterday reported that business demand for all types of commercial property fell in the fourth quarter of 2007. Across the UK, more chartered surveyors reported a drop in demand compared to the previous quarter.
In the West Midlands, demand for office space continued to ease but at a slower pace than during the previous quarter. Surveyor confidence also weakened in the region.
Simon Quantrill, partner at Knight Frank and RICS West Midlands spokesman, said: "Pessimism regarding the near term economic outlook is beginning to make serious dents in market sentiment as surveyors see a dip in demand for office space, similar to that already affecting the retail market.
"We would normally expect to see a flurry of new enquiries and a corresponding increase in office activity during January but this has been sadly lacking so far.
"However, with a number of new deals in the pipeline, and significant developments in the region due for completion, the outlook for 2008 as a whole remains optimistic. Once the economic uncertainty begins to fall away, we expect to see a record number of take ups in Birmingham city centre alone."
The number of surveyors reporting a decline in office demand moved into negative territory for the first time in over four years in the last quarter of 2007 and the retail sector saw the biggest decline of all sectors.
Nationally, demand for retail space fell at the fastest pace in six years as a slowing housing market and the recent credit turmoil began to impact on both retailer and consumer confidence.
In the West Midlands, confidence in the retail sector dropped a further 36 per cent on the previous quarter, as these influences worked their way through the market.
New buyer enquiries also fell nationally across all three sectors having previously held firm against credit market jitters.
The retail sector witnessed the sharpest decline in enquiry levels with the greatest declines in Central London and Wales.
As with demand, the number of surveyors reporting a fall in enquiries fell to the worst level since the first quarter of 2003.
According to the RICS, the credit market turmoil continued to have a negative impact on investment into commercial property assets with capital values declining across all areas.
Surveyors reported declines in capital values within the office sector. Recent financial turmoil has seen investors re-price risk. In the retail market the net balance of capital values also fell sharply.