RICS quarterly survey says that demand in the North and South East is driving the office market.

Demand for office space is rising at the fastest rate for four years according to a quarterly RICS survey. The North and South East recorded the highest increase in demand but the survey said that London’s performance had fallen since the last quarter.

The survey said that demand had increased consistently for the last 15 months but predicted that vacant property would prevent rental increases in the Central London market.

RICS economist Milan Khatri said: “Office demand is still driving the commercial sector, although the industrial and particularly retail sectors look set to pick up in 2005.”

Khatri said that fears of an economic relapse seem so far unfounded as rising real estate demand pointed to improved corporate confidence. He added: “Occupier demand for property is rising steadily but investor appetite for commercial real estate is booming.”

The survey said that rising interest rates and high levels of debt among consumers meant prices were being driven down in shops. As a result retailers were looking to increase sales volumes and reduce overheads by moving to out-of-town locations away from the high street.