The CBI and property consultant GVA Grimley have warned of a looming drop-off in confidence in the property sector.

The latest CBI/GVA Grimley survey of 389 companies' property needs shows that demand for commercial property is holding up despite falling confidence in the rest of the economy.

But CBI director of economic analysis Sudhir Junankar said the situation is unlikely to last.

"We think it is inevitable that the market will soften throughout 1999," Junankar said.

GVA Grimley head of research Stuart Morley said the drop-off is likely in the second half of the year, with 15% more firms expecting their output to increase rather than decrease over the next six months.

Morley said: "We expect that, over the next six to 12 months, confidence will weaken as the downturn in the wider economy filters through. It will be a gradual weakening, rather than the steep drop we saw in the early 1990s." The survey found that the most significant barrier to businesses making property changes is the lack of suitable buildings.

Grimley associate Roger Waddams, who specialises in industrial property in the South-east, said many companies are still holding back from making property changes.

He said: "Supply of the right sort of properties at the right price is still short, and many firms are sitting on the fence. In the meantime, demand is definitely not going away." Waddams believes the shortage of property will be a boon for the design-and-build market.

He said: "I think it is inevitable that design and build has to grow under these conditions."