The balance of surveyors reporting demand for commercial property in Q3 has fallen at the fastest pace in a decade, says RICS’ Commercial Property Survey published today.

52% more Chartered Surveyors reported a fall than a rise in demand compared to 50% in Q2 2008.

All sectors remain firmly in negative territory for the fourth consecutive quarter with the industrial and office sectors dropping to the lowest balance in the survey’s history.

The worst hit area continues to be the retail sector with 59% more Chartered Surveyors reporting a fall than a rise in retail demand, a slight improvement from 63% in Q1.

The continuing financial turmoil and a slowing housing market is clearly weighing upon both retailer and consumer confidence.

Financial uncertainty has impacted upon decision making in the business community with many re-evaluating their demand for commercial property space.

54% more Chartered Surveyors reported a fall than a rise in new enquires for business space compared to 53% in Q2.

The supply side of the market is still loose with all three sectors feeling the depressing effects of the continuing climate of financial uncertainty.

The amount of available floor space increased at the fastest pace in the survey’s history with the retail sector leading the way.

33% more Chartered Surveyors reported a rise in available floor space compared to 27% in Q2.

The value of inducements rose at the fastest pace in the survey’s history (a lead indicator of falling rents) as landlords tried to counter falling demand with incentives.

In fact, confidence towards the rental outlook fell to the lowest level since the survey began in 1998 with the greatest pessimism in Central London.

Meanwhile, confidence in activity is close to record lows and going into the Christmas trading period the retail sector is expected to be the worst performer.

Commenting, Oliver Gilmartin, RICS senior economist said: "The ongoing drag from the credit crunch is permeating through rental sentiment across all regions and sectors, especially in the Central London Office market where recent worry over the health of the hedge fund industry is only adding to the sense of pessimism.

"The intensification in credit strains following the collapse of Lehman brothers will undoubtedly further dampen investment and occupier demand heading into the fourth quarter.