RICS: Commercial market outlook improving

The latest RICS Commercial Property Market Survey showed further a improvement in the real estate market but it highlighted pronounced regional and sector differences in both the occupier and investment markets.

In Q4, 18% more surveyors expected new sales and lettings to increase in the next three months, a rise from +8 in Q3 2010.

This is the best result since before the onset of the credit crunch (Q1 2007). Meanwhile, 8% more commercial property professionals reported a rise rather than fall in occupier enquiries, compared with -22 previously, suggesting that some businesses may now be looking to expand.

Significantly, in the last three months of 2010, overall tenant demand for commercial property stabilised, with a net balance of zero, up from -6.

While the picture clearly is improving, surveyors continue to cite uncertainty over the prospects for the economy as a drag on the market.

Commenting on the report, RICS chief economist Simon Rubinsohn said: “While it is true that some optimism is returning to the real estate world, the commercial market still faces significant challenges.

“Regional variations are becoming increasingly visible with the picture on rents and capital values broadly reflecting the emerging economic recovery.

“Prime London offices are, and will continue to be, the most buoyant part of the market.

“Meanwhile, secondary offices around the country are a particular area of concern as oversupply will be compounded by likely consolidation in the public sector.

“On top of this, the general lack of new projects being initiated outside of the capital has important ramifications for regeneration in large parts of the country.”