LONDON, Jan 26 Reuters Britain39;s commercial real estate sector is increasingly feeling the pinch of higher borrowing costs, as investor enquiries declined in the fourth quarter and the outlook for the year ahead worsened, an industry survey showed on Thursday.

The Royal Institution of Chartered Surveyors RICS said 83 of respondents to its quarterly commercial property survey thought the market was already in a downturn, up from 81 a quarter before. Almost half considered this downturn to be in its early stages.

RICS said investor enquiries fell across all sectors for the first time since the start of the pandemic, with a net balance of 30 of respondents citing lower investment demand.

Tarrant Parsons, senior economist at RICS, said the investment side of the commercial property market was significantly affected by the Bank of England39;s BoE tighter monetary policy, and that higher borrowing costs were weighing on investor demand and hurting valuations.

The BoE39;s Monetary Policy Committee raised its main rate at its last nine meetings and markets have priced in a half percentage point increase to 4 for Feb. 2.

British consumer price inflation was running at 10.5 in December, nearly five times the Bank39;s 2 target.

Nearterm capital value expectations dropped sharply across the board, and the industrial sector saw the weakest reading since 2011.

Linked to the rise in government bond yields over the past six months, capital values have pulled back noticeably of…