Retail property market still falling

The consumer spending slowdown has further weakened the retail property market, which has continued its downward slide since the beginning of 2005.

Surveyors questioned reported the highest rise in available retail floor space since the survey begun six years ago, according to the quarterly commercial market survey by the RICS.

However, the news isn't all bad: activity in the office market has risen nationwide, while business demand for property has risen slowly too.

Milan Khatri, RICS chief economist, said the disparity is a symptom of the UK's two-tier economy.

He said: "People at the grass roots of retail business may be under the impression that there is an economic recession, whereas those in financial and business services would see a different reality of economic prosperity."

Meanwhile, UK Purchasing Managers' Index construction report said that in general UK construction activity grew in April, though at a slower rate than in March.

However, activity in the commercial sector was healthier than in March, while future business activity is also slightly healthier month-on-month.

Summary of RICS findings:

Office property market
In the first quarter of 2006:

• New development starts rose at the fastest pace since 2001, and was particularly strong in Yorkshire & Humberside and eastern regions
• New development completions fell moderately, with the biggest falls in London since 2002. Wales, the southeast and Yorkshire & Humberside all performed strongly
• Lease lengths continued to rise, mainly driven by developments in London, the south east and eastern areas.

• New development starts dropped slightly. They stabilised in London, the southeast and northeast but dropped in the East Midlands, Southwest and Yorkshire & Humberside. The Northwest, Wales and West Midlands saw rises
• New development completions resumed their downward trend following a moderate rise in the previous quarter. The biggest falls were seen in the East and West Midlands, while the North saw drops for the first time in three years
• While occupier demand in the retail market continued to fall, a little confidence has started to return because the falls are smaller than in previous quarters.

• New development starts stabilised following the previous quarter's slight drop. The biggest fall was in London, while Wales and the Southwest saw rises
• New development completions rose for the third consecutive quarter, but at a slower pace than before. Eastern and Southwest regions saw the biggest rises
• Confidence in the sector is slightly less positive than in the previous quarter.