HONG KONG, Jan. 25 /PRNewswire-Asia/ -- The amount of office space available to tenants in London declined for the first time in two years as the London economy started to lead the country out of recession says the RICS' UK Commercial Property Survey published on 21 January 2010.
Demand for business property increased in the fourth quarter of 2009 with office space and industrial property proving particularly popular but demand for retail space continued to decline. Fourteen percent more chartered surveyors reported a rise in tenant demand up from eight percent in the previous quarter. This is the second successive rise in tenant demand and the first time that there has been an upward trend since early 2007.
Eight percent more chartered surveyors reported a fall in available floor space in London down from a positive balance of 37 percent. This is the first time the net balance for office availability has turned negative for two years with central London witnessing the strongest upturn in activity. As a consequence, the lack of available space has had an impact on office rents in the capital which stabilised for the first time in two years.
These positive improvements have increased the expectations of chartered surveyors for future lettings with optimism rising across the office and industrial sectors. The biggest rise in confidence has been in the office market followed by the industrial sector although expectations towards retail lettings remains flat. Investment transactions rose across all sectors with 35 percent of chartered surveyors reporting a rise, up from seven percent in the third quarter.
Commenting, Oliver Gilmartin, RICS senior economist said:
"Surveyors have turned mildly optimistic on the outlook for rents in London for the first time in over two years outside the retail sector as the capital continues to drive the recovery. Whilst retail property has seen the strongest rebound since August it is lagging the occupier market turnaround. However, the news that lease lengths are no longer declining in the capital and incentives are being scaled back for offices and industrials will come as some comfort for investors whom have driven a sharp rebound in pricing since autumn.
"To be sustained, the rapid rise in capital values in the London market needs to be supported by further rental increases particularly as prime yields are rapidly approaching financing costs. The reluctance of banks to lend to developers has clearly added some support to rents in London as available space is no longer rising outside the retail sector. Significantly, development starts continue to fall back."
Focusing on local issues, David Faulkner, RICS Hong Kong Chairman commented:
"The increase in demand for office space has been mirrored in Hong Kong where the financial sector has started rehiring and vacancies are starting to fall in prime buildings. This has enabled some landlords to increase rents during the fourth quarter, with continued growth expected in 2010."
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RICS (Royal Institution of Chartered Surveyors) is the mark of property professionalism worldwide. It covers all aspects of property, construction and associated environmental issues. RICS has 140,000 members globally and represents, regulates and promotes the work of property professionals throughout 122 countries.
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SOURCE Royal Institution of Chartered Surveyors (RICS)