LONDON-The RICS commercial property survey for the second quarter of 2002 shows market activity slowing and a rise in vacancies as companies shelve expansion plans. 12% more chartered surveyors reported a fall in new sales and lettings than reported a rise. 11% more reported rises in unoccupied space. A similar number reported falls in new enquiries and expectations for capital and rental values also took a dip.

London has been hardest hit, but the report did identify some areas where demand and confidence is still increasing, especially in the North of England. Offices and industrial demand has fallen most sharply but retail activity has remaining relatively steady.

However the market downturn has not yet impacted quoting terms. The survey found lease lengths are down from this time last year but the decline is very modest. There has also been a slight rise in inducements, such as rent free periods and help with fitting out costs.

RICS chief economist Milan Khatri said:”The fact that activity has come off in the commercial property market is not good news for the wider economy. It is clear evidence that business expansion plans are limited due to a lack of confidence in the economic outlook over the mid-term. However, interest in commercial property as an investment has picked up as the stock market has fallen.”

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