by James Robinson
Confidence in the commercial property market has slumped dramatically over the past three months, according to the Royal Institution of Chartered Surveyors’ Commercial Property Market Survey for the second quarter of 1998.
The report shows “a sharp drop in confidence in all sectors of the commercial property market” and warns that it is poised for a late 1990s slowdown.
The number of surveyors expressing confidence in the market is still greater than the number that say conditions will worsen, but only just. The balance between the two now stands at +5.8, a 24-point fall on the first quarter of this year and the lowest figure since the third quarter of 1995.
Office market confidence has all but collapsed, falling from 35% in the first quarter to just 0.4%. The retail market is also badly hit, with confidence falling 20 points from 31.8% to 11.3%. “Confidence in the retail sector has slipped, reflecting lower levels of sales across the country,” says the RICS.
Confidence in the industrial market has also fallen to 5.2%, the lowest level for three years.
The central London retail market has witnessed a “startling” collapse in confidence, showing a net balance of -62.5%. The institution blames the fall on a reduction in the amount spent by foreign tourists as a result of the strong pound.
The latest research from Colliers Erdman Lewis backs up the RICS’s findings. It says that the total return on all property, as measured by the Investment Property Databank (IPD), will be 16.1% in 1998, down from last year’s figure of 16.8%.
It claims that the retail market “has peaked”. The total return on retail property is set to fall from 18.5% in 1997 to 15.1% this year. Out-of-town shopping centres will experience the biggest change in values as total returns fall from 26.2% in 1997 to 19.4% in 1998.
