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LONDON-Potential occupiers are reluctant to make new property commitments, according to the latest quarterly survey from the Royal Institution of Chartered Surveyors. Occupier confidence is now at its lowest level since the survey began seven years ago.

The survey had already charted declining confidence during the second quarter of the year but this has accelerated in the third. In the latest quarter, 25% more chartered surveyors reported a fall in business occupation than reported a rise, against 16% in quarter two,

London has been hardest hit with 73% more chartered surveyors reporting a fall in office demand than a rise. The RICS report said this reflects continuing weakness among the technology and telecommunications sectors, and the recession in the manufacturing sector is now affecting the service sector. RICS economists believe the downturn is likely to accelerate towards the end of the year.

The report notes that landlords have started to increase incentives in an effort to shore up office lettings. For the first time since the report began, surveyors have reported a rise in inducements. There has been a swing of bargaining power towards the tenants, with 4% more surveyors reporting lease lengths falling rather than rising in the office market, while rents are expected to be static.

Graham Chase, chairman of the RICS commercial faculty, said: ‘We are in a downturn and many believe this was inevitable after such a sustained period of growth. However, unlike1990, financial institutions have been both prudent and responsive in reaction to these changes. This bodes well for the mid term and for those who hold their nerve.’

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