DEMAND for office space in the South East has grown over the last quarter, according to the latest report by the Royal Institution of Chartered Surveyors (RICS).

Interest from potential new occupiers has continued to increase in the region, but office rents have remained static. At the same time, the number of new office developments has fallen. If this trend continues then demand will exceed supply and rents would rise.

Trevor Hines, RICS’ South East regional director, said: “Many retail outlets and manufacturers experienced a bounce from economic recovery last year, but the market is bedding down and surveyors are reporting a new realism in the context of higher interest rates and uncertain economic outlook globally.”

Inducements used by landlords to encourage tenants to take up leases, such as rent-free periods, are an indicator of demand. These showed the largest falls in the South East retail market, indicating an increase in demand.

A levelling-off of activity in the South East’s industrial sector reflects a near standstill in occupier take-up, but surveyor confidence remains strongest in the South East for an improvement in the situation. The largest increase in incentives was recorded in this region, accompanying the largest recorded falls in lease lengths.