The RICS this week said the commercial property market had started to show the strongest signs of recovery in more than four years.

It noted that in the fourth quarter of last year activity had risen at the fastest pace since the second quarter of 2002.

The key factor in this growth was the office sector in the North and South-east, where demand has increased for the past 15 months.

However, demand for office space in London has dropped, and surplus space is expected to curb rents increases in the centre of the capital.

Lease lengths have continued to fall, as tenants are often no longer willing to sign up for a traditional lease of 25-35 years.

“Office demand is still driving the commercial sector, although the industrial and particularly retail sectors look set to pick up this year,” said RICS economist Milan Khatri.

At present a rising demand for retail and industrial space is confined to regional pockets in Wales and the South-east. It remains weak in London.

“Fears of an economic relapse seem unfounded so far as rising property demand points to improving corporate confidence,” said Khatri. He noted that the property picture was consistent with a steady recovery in the UK economy.

Property investment continues to boom, as pension funds, institutions and private individuals put their money into buildings rather than equity markets.