Surveyors upgrade expectations of rent rises for next four years, but survey reveals jitters in retail market.

Demand for business premises rose for the sixth consecutive year despite a lacklustre performance by the retail sector, a RICS report has found.

The steady increase in demand has led chartered surveyors working in commercial property to upgrade their expectations of rent rises to the highest in four years.

Levels of vacant business space dropped back at their fastest rate since late 2000, returning some bargaining power to landlords. The value of inducements offered by surveyors to secure tenants also fell for the first time in four years but the current market still favours occupiers.

The report also showed continued growth in the office sector and strong activity underpinning demand in the industrial property market. However a slowdown in consumer spending has squeezed retailer’s margins.

He said: “The outlook for the commercial property market is for steady financial returns over the next two years rather than the heady price appreciation on 2004,” he said.