Office market booming while retail struggles

Demand for business property was up for the fifth consecutive quarter in autumn 2006. But while occupiers were clamouring for offices, demand for retail space has remained weak, a new RICS report has said.

Occupier demand for commercial property strengthened into the third quarter of 2006, as businesses stepped up investment spending and took on more employees, the report said.

Demand for office space was particularly intense, showing the largest rise on record due to robust activity in the business and financial sector.

But research found that this activity has yet to travel down into high street spending and then into more demand from retailers for shop space.

Take up of industrial space rose due to a strong global economy.

The report, RICS commercial market survey UK, third quarter 2006, found that available commercial property space on the market showed no change in the third quarter. This was the first time there had not been an increase for over a year.

Investment demand for commercial property showed a solid increase in the past quarter, led by strong demand for prime offices.

However, the retail property market was the only sector to see an increase in the growth of purchase activity. The RICS said: “The slowdown in part reflects a constraint on activity from a lack of investment products on the market, but also from rising market interest rates.”