DEMAND for commercial property is expected to slow down during the first half of 2003, according to a new survey.

The latest twice-yearly property trends survey, published by the CBI and property advisers GVA Grimley, shows more than a quarter of the companies surveyed increased their property holdings over the past six months, while 14 per cent cut them.

Looking ahead to the first half of 2003, the survey, carried out between October 28 and November 13 among 290 firms, points to more modest growth in demand as the number of businesses expecting their property portfolios to remain unchanged has fallen.

The increase in property demand was led by London and the South East, which reported the highest optimism.

Only two other regions, Scotland and the North, experienced an increase in optimism, while everywhere else showed a decline.

Nigel Bourne, the CBI's South East regional director based in Sevenoaks, said: "The buoyant activity in the commercial property market in the second half of last year owes much to stable interest rates and the strength of the service economy.

"However, with retailers now joining manufacturers and office-based companies in cutting back on investment in buildings over the coming year, it is not surprising that overall demand for property is now expected to grow more slowly." Over the next six months the retail sector is less optimistic than it has been for several years as consumer spending slows, and the ramifications of the worst pre-Christmas trading in a decade, fuel concerns that 2003 could mark the end of Britain's consumer boom.

For the first time since the last recession retailers failed to record a year-on-year rise in sales in the run-up to Christmas, according to a CBI report. Demand is expected to remain broadly stable, well below trend for this sector.

Mr Bourne added: "A slowdown in property demand by occupiers over the next six months, particularly in the office sector, reflects increased economic uncertainty and reduced business optimism.

"Nevertheless, the survey also shows that business output is still expected to be stronger than over the last six months and more companies expect to increase, rather than decrease, their property holdings."