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North East demand for commercial property drops dramatically

Demand for commercial property in the North East has fallen dramatically, with a drop in demand and increasing availability driving down expectations in the last quarter of 2011.

The RICS UK Commercial Market Survey indicated that 15% more surveyors had witnessed a decrease rather than an increase in interest from prospective tenants, which resulted in an increase in overall availability in vacant floor space. Office and retail spaces saw the most significant increases, with net balances of 62% and 35% respectively.

A fall in demand and an increase in availability’s impacted on overall rental expectations, which weakened weakened over the quarter, pushing it further into negative territory at -39%.

Following this, 35% more landlords were found to have used incentives to attract tenants, while would-be occupiers are requesting rent reductions and higher inducements.

Economic uncertainty and constraints on funding have also contributed to a drop in enquiries in the final part of the last year, and this is expected to translate into a low level of activity in 2012.

Capital value expectations have also eased in the region with a more negative view of the prospects being taken in all three sectors.

Simon Rubinsohn, RICS Chief Economist, said: “Rental expectations in the North East have predictably become more negative in the face of the recent run of grim economic news.

“Meanwhile, the on-going shortage of mortgage finance is set to dampen investment activity. Confidence is key to a sustained recovery in the sector and this is going to be hard to bolster until the key issues surrounding the European sovereign debt crisis are resolved.’’

This was posted in Bdaily's Members' News section by Ruth Mitchell .