RICS reports: factory gates open as high street shutters come down

Demand for industrial property has risen at the fastest pace in over five years whilst the retail property market continues to decline, despite its recent improvement in consumer spending, says the RICS commercial property survey, published yesterday, 2 August 2006.

7% more Chartered Surveyors reported a rise than a fall in business demand for commercial property, the fastest pick up in two years, with occupier and investment demand rising for both office and industrial property. 29% more Chartered Surveyors reported a rise than a fall in investment sales, indicating strengthening confidence in real estate and an increasing number of individual private investors in the market.

The industrial property market rebounded strongly, aided by a strengthening global economy which is providing support to the manufacturing sector. Demand for industrial space rose at the fastest pace in over five years, boosting surveyor confidence to the highest levels in just over six years. Rising output and export demand is prompting manufacturers to take on more space and increase investment.

Retail property demand has fallen for the sixth consecutive quarter. The falling price of goods and rising oil prices have forced retailers to focus on efficiency, with employment in decline. Investment activity has increased in the retail sector despite this drop off in occupier demand. Chartered Surveyors again reported a rise in vacant retail floor space but office space continued to decline, driven by strong demand in the financial service sector in Central London.

Occupier demand in the office market accelerated at the fastest pace in the survey's history with 26% more Chartered Surveyors reporting a rise than a fall. The increased rise in activity occurred despite financial market turbulence and was again almost entirely driven by the London market.

RICS Economist Oliver Gilmartin said: "The Industrial property market is gaining support from a strong global economy, increasing activity in the previously beleaguered manufacturing sector. Despite a recovery in sales, retailers are tightening their belts as factory gates open and shop shutters come down, though investors continue to buy into the sector. London continues to lead the office market boom as the financial services sector creates a property rich capital."

Source: RICS

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