A new survey of the commercial property market suggests that retail is bearing the brunt of the downturn, with the sector showing the greatest falls in tenant demand and rental expectations.
According to the Royal Institution of Chartered Surveyors, demand for retail space fell further last quarter as economic uncertainty continued to plague the high street.

In the three months to September the uptake of retail premises was down 18%, interest having now fallen for five consecutive quarters. This was coupled with a marked upturn in unoccupied floor space, as a net balance of 20% more surveyors reported rises in availability. This resulted in a continued fall in rental expectations, down 28%.

Nationally, overall demand for commercial property continued to stutter, with 9% more surveyors reporting falls rather than rises in interest from potential occupiers. RICS says the ongoing challenges surrounding the UK economy continues to weigh heavy on businesses and their appetite to expand.

As a result of this negativity, surveyors' expectations for future rents continued their slide, with a net balance of 11% predicting values to drop over the coming three months. Overall rental expectations have now remained negative since the autumn of 2007.

Capital value expectations are also falling in all areas with the exception of London, where the market is underpinned by overseas investment.

RICS chief economist Simon Rubinsohn commented: "Unsurprisingly, with the retail sector still struggling to find its feet, fewer companies looked to take on new premises last quarter and, consequentially, the amount of empty floor space continued to rise. This was the case in most parts of the country and it was a similar story for the commercial property sector as a whole.

"Of particular note was the downturn in demand that was seen in London. The capital has typically managed to keep its head above water better than most other parts of the country but interest from occupiers away from the prime office sector fell last quarter."