Demand for commercial property has fallen for the first time in five years.

A report from the Confederation of British Industry (CBI) reveals 20 per cent of companies decreased property holdings in the past six months.

The biggest fall was among firms in the South-East, with the region moving from the best performer at the end of last year to the worst.

Six months ago, 25 per cent of companies in the region said demand for property was up, compared to 19 per cent now.

Ten per cent thought demand had fallen but now 18 per cent think it has.

Tim Hardwicke, associate at the Brighton office of Stiles Harold Williams, said the local commercial property market was not as bleak as the CBI report suggested.

He said: "Generally the big office players are not looking at acquiring additional space but demand is coming from private and partnership companies.

"In the past three weeks we have received three inquiries about office accommodation of between 25,000 and 50,000sqft."

Other regions showed an increase in property demand, with 21 per cent of companies in the North seeing an improvement compared to just three per cent who did not.

However, the study found that 20 per cent of companies expected the market to pick up in the second half of this year.

In particular, demand for retail property looks set to increase, with 14 per cent of companies anticipating a rise compared to just two per cent who did not.

Demand in the office sector could go down, with 14 per cent of companies expecting a fall.

Optimism about the overall business outlook continued to deteriorate, with 35 per cent of companies saying they were less optimistic about the next six months compared with 13 per cent who said they were more so.

Doug Godden, CBI head of economic analysis, said: "The fall in demand reflects the same pressures that have held back business investment generally - weak demand from overseas, uncertainty about consumer demand in the UK and a squeeze on profitability.

"Firms expect to increase their property holdings in the second half of the year but will want to see more solid signs of global economic recovery before acting."

Tuesday June 24, 2003