Record fall in demand for space
The ongoing pain in the commercial property sector has been highlighted by the latest figures suggesting a record fall in the number of surveyors reporting a demand for space.
According to the latest figures for quarter three, across the UK, 52 per cent more chartered surveyors reported a fall than a rise in demand compared to 50 percent in Quarter 2 2008. All sectors remained downbeat for the fourth consecutive quarter with the industrial and office sectors dropping to the lowest balance in the survey’s history.
In the West Midlands, 13 per cent more chartered surveyors reported a fall than a rise in occupier demand for office space during quarter three, as available floorspace increased at the quickest pace in over five years. In Birmingham the take up rate of prime office space has actually been higher than many previous years thanks to a number of high-profile lettings such as Wragge & Co and Barclays to Snowhill but the city still has significant available space, much of it in key schemes such as Colmore Plaza, Baskerville House, 45 Church Street and 35 Newhall Street.
Simon Quantrill, partner at Knight Frank and RICS West Midlands spokesperson, said financial uncertainty had impacted upon decision-making.
He said: “Enquiry levels were low during the previous quarter but this is to be expected during the traditionally quieter holiday period. The autumn pick up in activity has been slower coming this year but October has been busier with viewings on the up. Activity for smaller occupiers in particular has increased, whilst the medium to large firms hold tight during these uncertain times.
“Despite the economic downturn, we will still see a record lettings year within Birmingham, and even without the big lettings, such as Wragge & Co at Snowhill, we are on target for a stronger finish than expected. Likewise the M42 corridor is having a good year and a number of new deals are in the pipeline.”
The worst hit area continues to be the retail sector with 59 per cent more chartered surveyors nationally reporting a fall than a rise in retail demand, a slight improvement from 63 per cent in the first quarter. The West Midlands followed this trend with a seven per cent decrease in those reporting a fall as the continuing economic turmoil and slowing housing market clearly weighing upon confidence.
The supply side of the market is still loose with all three sectors feeling the effects of the continuing difficult financial climate. The amount of available floor space increased nationally at the fastest pace in the survey’s history with the retail sector leading the way.
The value of inducements rose at the fastest pace in the survey’s history as landlords tried to counter falling demand with incentives. In fact, confidence towards the rental outlook fell to the lowest level since the survey began in 1998 with the greatest pessimism in Central London. Meanwhile, confidence in activity is close to record lows and going into Christmas the retail sector is expected to be the worst performer.
Despite this, surveyor confidence in the office market improved during quarter three – up 19 per cent on the previous three months.