Retail occupier demand fell for the third consecutive quarter according to the latest RICS UK Residential Market Survey.
In the East Midlands retail sector in Q4 2017, occupier demand fell with 27% more respondents reporting a fall in demand from prospective tenants.
Alongside this, the retail sector saw an increase in the availability of leasable space.
Rents across the region are also expected to decline for retail space in the near term, and this picture is predicted to continue over the next 12 months.
Although rent projections for prime retail space remain flat in Q4, the weakness in retail rental values is mostly in secondary retail locations remain in negative territory.
Across the region, headline occupier demand for commercial property slipped into negative territory in Q4, despite rising industrial demand the continued decline in retail and a fall in office demand underpins the all sector net balance.
Although the East Midlands office sector fell in Q4, the value of landlord incentive packages has now risen in six straight reports.
Looking further ahead for industrial and office space, over the next twelve months both prime and secondary industrial rents are predicted to rise, while prime office rents are expected to see modest gains and the outlook for secondary offices remains flat.
Simon Rubinsohn, RICS Chief Economist said: “The weakish tone to the Q4 survey results for the retail sector sits comfortably alongside the generally disappointing trading statements emanating from the high street in the run-up to Christmas.
“The counterpart to this is the ongoing strength in demand for well-located warehouses to support the inexorable rise of the online consumer.
“Meanwhile in the office sector, the resilience of the headline rent indicator is masking the increasing attractive inducement packages required to encourage take up of space.
“Valuations particularly in the capital’s office market continue to look stretched but overseas investors remain ready buyers for now even as domestic money seeks out opportunities elsewhere around the country.”