THE pressure faced by the retail industry from factors such as rising costs and the growth of internet shopping has been underlined by a major survey, which reveals that demand for retail space tumbled in the second quarter of the year.

Retail was the only sector in Scotland to post an outright decline in occupier demand in the second quarter, according to the latest UK Commercial Property Market survey from RICS (Royal Institution of Chartered Surveyors), published today.

The survey found that a net balance of 42 per cent of respondents reported a fall in demand for space, with sites in so-called secondary locations – out with high streets in Scotland’s major cities – coming under most pressure. It was the second quarter in succession that a net balance of 42 per cent of surveyors reported a decline in demand for retail space in secondary sites, RICS said.

The survey canvasses the views of “many hundreds” of chartered surveyors in Scotland.

In comments attached to the report, Scottish-based surveyors underline the challenges facing the retail sector from rising overheads, including last year’s controversial hikes in business rates, weak consumer confidence and online shopping. One surveyor criticised the Scottish Government for not doing enough to mitigate the effects of higher business rates in the north-east of the country, where the economy has been buffeted by the downturn sparked by the collapse in oil prices.

Scottish ministers launched a consultation on proposals to change business rates legislation earlier this month.

Aberdeen-based surveyor Alex Robb said: “Aberdeen has been badly affected by the rating revaluation and to soften the impact England and Wales have brought forward the next revaluation to 2021. For some unknown reason the Scottish Government is resisting this which demonstrates their total disregard to the suffering of north east businesses.”

The Scottish break-down of the RICS report does not include information on demand levels for premium retail locations. However, the survey said that the “prime retail rent indicator is also now in negative territory across the UK.”

As a result of declining demand, the report found the availability of retail space across the UK rose sharply over the quarter. With a net balance of 46% reporting an increase, it was the biggest pick-up in availability since 2009.

David Castles at Ian Philp (Glasgow) said: “The secondary retail market I am involved with has seen a significant downturn with the reduction in consumer spending, increased base costs and the continual growth of internet shopping. This sector will be required to reinvent itself to generate future growth.”

Underlining the difficult trading conditions facing retailers, more than one-third of respondents reported an increase in the use of Company Voluntary Arrangements (CVAs) in the last year. It was the first time that the survey respondents were asked to comment on CVAs, which comes after big-name retailers such as House of Fraser and Mothercare have used the arrangements to strike deals with creditors and slim down their store estates, with thousands of jobs being cut in the process.

“As such, it is unsurprising that over 70% of contributors sense investors will be looking to scale back exposure to the sector,” the report said.

However, while retail struggles, the report found that tenant enquiries continued to rise in the industrial sector during the second quarter, noting that it continues to attract solid demand from both occupiers and investors.

RICS added that the investor market mirrors trends in the occupier market, with a net balance of 21 per cent of chartered surveyors reporting a fall in retail investment enquires.

Overall, a net balance of 11% of chartered surveyors reporting an increase in investor demand.

At UK level, national investment enquiries slipped to a net balance -3% during the second quarter, the poorest return since the immediate aftermath of the referendum. Demand failed to rise in the office sector and declined steeply for retail assets, weighing down the all-property average, the report found.