UK Commercial Property: Don't Dive in Yet

The UK commercial property market is beginning to lose its investor appeal as a slowing economy drags on the once buoyant sector, Simon Rubinsohn, chief economist from RICS, told "Squawk Box Europe" Wednesday.

The Royal Institution of Chartered Surveyors (RICS) survey of Britain's commercial property showed tenant demand was falling at the fastest pace since the first quarter of 2001 and new enquiries had also moved into decline.

"If we were to see tenant demand continue to soften, that would really begin to undermine the investment case," Rubinsohn said.

The number of surveyors reporting a decline in office demand moved into the negative for the first time in over four years, the RICS survey showed.

The retail sector saw the biggest declines of all, as a slowing housing market and the recent credit crunch began to have a negative impact on both retailer and consumer confidence, the survey also found.

Commercial property hasn’t yet found a bottom, Rubinsohn warned, as many investors see the recent dips as an ideal opportunity to snap up assets as discount prices.

"The major drops have already happened … now is the best time to get in," Iain Keys, director of real estate at London & Capital, told "Squawk Box Europe" on Monday.

But Rubinsohn pointed out that the survey showed weakness in the underlying components and not just sentiment, so the slowdown could go on for some time.