Demand for buying and letting commercial property has fallen to four-year low as turmoil in the credit market scares off prospective tenants, figures from the commercial property industry body show today.

The findings from the Royal Institute of Chartered Surveyors are likely to stoke fears that the commercial property market is heading for a collapse not seen since the early 1990s.

Eight per cent more chartered surveyors expect a fall rather than a rise in demand over the coming three months, the most negative sentiment recorded since the end of 2003.

The pessimism follows a sudden downward swing in confidence between the start of July and the end of September when One per cent more chartered surveyors reported a fall rather than a rise in demand, the first time that the net balance has turned negative since 2005.

Simon Rubinsohn, chief economist at the RICS, said: "The turmoil in the credit market is being most acutely felt in commercial property as the sector is more dependent on capital market funding than in the past. Business expansion has been put on hold in the short term with the near term outlook for rents weaker as a result. "

Mr Rubinsohn said: “Fears of the impact of the credit crunch have made investors retreat to the margins as confidence in returns diminishes. Sentiment in the market is at the lowest point in four years and is unlikely to improve in the short term.”

Tighter lending conditions are forcing the big high street names to focus on efficiency gains over expansion

The credit crunch has led to a decline in capital values across all sectors but the office sector has seen the biggest fall in investor demand, as the financial sector turmoil has seen investors re-price risk.

The negative sentiment was mostly driven by the retail sector where confidence fell to the lowest level since the first quarter of 2003.

Retailers are feeling the impact of negative consumer confidence, attributed to a slowing housing market and the Nothern Rock debacle.

Confidence in rental expectations halved in the third quarter, but still remains positive outside of the retail sector.

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