LONDON, July 28 Reuters Britain39;s commercial real estate sector is entering or might already be in a downturn, according to an industry survey, as higher interest rates push up investors39; financing costs and weaker consumer sentiment hurts demand for retail space.

The Royal Institution of Chartered Surveyors RICS said on Thursday that 43 of respondents to its quarterly commercial property survey thought the sector was in the early stages of a downturn, and a further 10 thought it was in the middle of one.

By contrast, three months ago 53 said the sector was in the early or middle stages of an upturn, a proportion that has now slumped to 22.

The gloomier macro outlook appears to be dampening sentiment across the commercial real estate market, RICS economist Tarrant Parsons said.

Given interest rates are set to rise further from here, it appears the market may be at a turning point.

British consumer price inflation hit a 40year high of 9.4 in June, and financial markets expect the Bank of England next week to raise interest rates by half a percentage point to 1.75, which would be the biggest rate rise since 1995.

Markets price in BoE rates hitting 3 by early 2023 and RICS said credit conditions for property investment were now tougher.

This appears to have dampened momentum behind investor activity in particular, with headline capital value projections turning flat on the back of this, it added.

Capital values were projected to fall outright for retail…