The commercial mortgage market is set for further troubles as demand for properties continues to fall.
The slump is worst in London where a continued downturn in business investment has seen interest in commercial property remain poor, although the rest of the country is holding up.
In its latest quarterly survey, the Royal Institution for Chartered Surveyors (RICS) said the office market had been hit hardest, with almost 50% more surveyors reporting a fall rather than a rise in demand.
Ongoing confidence has also dropped away. Only 3% of RICS members expected a fall in the sector in the last quarter of 2002, with the figure rising to 47% expecting a downturn in the first quarter of 2003.
However, the commercial sector can take some hope from retail business, with a slight improvement in prospects being offered by the continuing strength of consumer spending.
Louis Armstrong, chief executive of RICS, said: ‘There is little cause for cheer in the UK commercial property market at the moment although there are many firms, especially outside London, that remain unscathed. A turnaround in business investment would prevent the London malaise spreading, but it is difficult to say when this might happen in the current climate of global economic uncertainty.’
Commenting, Robert Hare, senior director for Bank of Scotland’s business division, said it was important not to associate London with the market as a whole.
‘It is fair to say there has been a move to the Docklands area and some of the City rents need to be reconsidered. However, in general the market is holding up at the moment,’ he said.