THE cooling economic climate has taken its toll on the commercial property market, a survey shows today.

The survey, by the Royal Institution of Chartered Surveyors (RICS), shows that overall demand for business property stalled in the second quarter, with more chartered surveyors reporting a slowdown.

But despite companies becoming more cautious, the office market is strengthening, supported by continued expansion in the business services and financial sectors.

However, retail and industrial demand is falling as changes in the economy begin to take effect.

RICS said higher interest rates and a slowdown in consumer spending during the past 18 months led to the retail property sector weakening, and lower manufacturing output led to a lull in industrial demand.

However, with interest rates predicted to fall soon, RICS said the commercial property sector may pick up later this year.

RICS vice-president, Graham Chase, said: "Investment appetite for real estate is being fuelled by low interest rates and is drawing more and more from private individuals and institutional investors. But businesses are less inclined to take space, a clear signal they are more hesitant about expansion in the current economic climate."

Published: 26/07/2005