According to figures from the newest Commercial Property Survey from the Royal Institution of Chartered Surveyors, tenant demand in Britain-particularly in London-has dropped for the first time in four quarters – bad news for the buy-to-let market, even with continued positive mortgage rates and favourable fixed-mortgage rates.

It appears that demand fell away especially in the commercial property sector, in which 7% more chartered surveyors recorded a fall rather than a rise in tenant demands during quarter 2. The figure was down from a positive 6%, and represents the first negative figure since 2009’s opening quarter, according to the report.

The demand among tenants for offices fell in all regions, although London witnesses the largest fall in sentiment. Some 38% more chartered surveyors recorded a fall rather than a rise in demand for office. The figure is a fall from the positive figure of 32% seen during the first quarter of this year.

Surveyors have indicated that the uncertainty fuelled by possible budget cuts have adversely affected a range of investment decisions. The industrial and retail markets also saw falling demand across most regions, although it appears that the north is the exception to this trend, with the demand for both industrial and retail properties still strong.

The confidence in the outlook for lettings has dropped for the first time since the second quarter of last year, and the confidence in the future of the letting of industrial and office properties in London dropped also. Confidence in the retail lettings sector, despite staying subdued overall, was up in Central and Greater London, with surveyor confidence rising from -58 to -7.

Oliver Gilmartin, senior economist at the Royal Institution of Chartered Surveyors, has indicated that budget uncertainty as well as a fragile recovery generally are impacting on a variety of sectors.

‘Surveyors have indicated that uncertainty as to the detail of budget cuts are weighing on firms’ investment decisions with respect to their property requirements. As a result, the rental recovery is stalling in its tracks on waning demand. It seems difficult however to reconcile the turnaround in the London market purely on domestic concerns,’ Mr Gilmartin stated.
 
‘Indeed, falling stock markets, worries over both the Euro zone debt crisis and the sustainability of the recovery appear to be weighing on occupational demand from large multinational occupiers. Investment demand has also fallen back for the first time in a year with some indication that prices are declining again outside the Central London office and retail sectors,’ he concluded.