Demand for buying and letting commercial property has fallen to a four-year low as turmoil in the credit market scares off prospective tenants, an industry body revealed yesterday.

The Royal Institution of Chartered Surveyors (RICS) is likely to stoke fears that the market is heading for a depression not seen since the early 1990s.

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

The findings pushed the share prices of Britain’s nascent £25 billion real estate investment trust (Reit) companies to fresh lows, wiping off hundreds of millions of pounds. The sector has on average lost 40 per cent of its value since the start of the year. Fears are also mounting that many heavily leveraged private owners of offices and shops may be turned into forced sellers over the coming months.

Without a loosening of the debt markets, some may find it hard to refinance borrowings and a flood of forced sellers could trigger sharp price falls. Six months ago, surveyors were expecting strong rent rises across all property sectors but yesterday’s findings from RICS revealed that surveyors are at best confident of only modest rent rises.

Their negative sentiment was mostly driven by the retail sector, where confidence fell to the lowest level since the first quarter of 2003. A net balance of surveyors expect rent falls from retail property in Greater London, the North East and South West.

Simon Rubinsohn, chief economist at 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.”

Pessimism grew between July 1 and September 30, when 1 per cent more surveyors reported a fall rather than a rise in demand, the first time the balance has turned negative since 2005.

This echoed concerns expressed this week by the heads of both Land Securities and British Land, Britain’s two most valuable commercial property companies, that price falls already under way across the sector could continue for several months.

British Land was forced to pull the £1.64 billion sale of its flagship Meadowhall shopping centre in Sheffield last month. This week it wrote down its value by 4.8 per cent over the three months to September 30, to £1.57 billion. Analysts believe further write-downs are inevitable. Together, Land Securities and British Land sit on estate valued at about £31 billion.

Land Securities slipped 49p to £14.51, yesterday, leaving it with a market value of £6.7 billion, a 31 per cent fall from the start of the year. British Land also touched a new low, off 32p to 880p, leaving it worth £4.5 billion, nearly half what it was worth at the new year.

Surveying the scene

—17 per cent more chartered surveyors said they expect a fall rather than a rise in prices of office buildings

—14 per cent more surveyors expect a fall rather than a rise in the price of retail property

—22 per cent more surveyors expect a fall in rent from occupiers of retail space in Greater London, reversing similar levels of confidence of demand just three months ago

—The market value of British Land, the FTSE 100 developer and owner of Meadowhall shopping centre has fallen from £8.8 billion to £4.5 billion since January

—Land Securities’ market value has slipped from £10.6 billion to £6.7 billion since January

—Hammerson’s market value has halved to £2.8 billion since its February peak

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