Demand for retail and office property in the East continues to fall during the pandemic

The latest findings from RICS Commercial Market Survey found that, in the third quarter, retail and office property continue to struggle with further drops in demand.

It noted a decline in occupier demand by 68% and 47% for each sector respectively.

That's not expected to change any time soon either, as RICS rental growth projections for the next 12 months for both sectors are expecting to see a further drop of 5.5 and 6.7%.

However, things are beginning to look up for property in the industrial sector, which has seen an increase of 22% in demand, compared to 18% in the previous quarter.

Over the next 12 months, prime industrial rents are expected to increase by 1.4%. Capital value expectations are also looking positive for prime and secondary industrial assets, returning net balances of 51% and 31% respectively.

Tarrant Parsons, RICS Economist, commented: "Sentiment across the commercial property market continues to be weighed down by the challenging economic backdrop. In particular, the physical retail sector, which was already struggling prior to the latest crisis, is being hit hard by the accelerated switch into online shopping and a drop in footfall associated with social distancing.

"Likewise, occupier demand across the office sector remains in decline and may continue to come under pressure going forward as businesses reassess their office space requirements following the increased prevalence of remote working.

“That said, some portions of the market appear to be well placed to expand in the face of these structural changes sweeping the economy. Indeed, the latest results point to a solid rebound within the industrial sector, with increased capacity in this segment needed to meet the sharp rise in online spending.

"As such, the twelve-month outlook for prime industrial rents and capital values has already returned to positive territory according to the Q3 survey feedback."