Retailers are queuing up for premises in Oxford city centre, despite the furore over the paving of Cornmarket Street, according to a new report.

The annual business occupier survey compiled by property agents Cluttons revealed strong optimism, with 80 per cent of occupiers foreseeing sales growth in the next two to three years.

The big change from last year was the increase in demand for Oxford city, with more than half (55 per cent) the retailers saying they would chose to expand or move to the centre, compared to 25 per cent in 2002.

This was despite the fact that the cost of rent and rates is the main factor influencing retailers' decision to move or expand.

Richard Dawtrey, of Cluttons, said: "Retail demand for Oxford is probably one of the highest in the country. There is very limited space and it's not just local businesses -- it's national retailers as well."

As an example, he said a shop in Walton Street had recently been viewed by 76 people, compared with an average of ten viewings for other commercial property.

Major retailers moving into Oxford city centre include Next with its clearance store in th Westgate Centre and fashion retailer USC in Queen Street. He added: "I can appreciate that people have been upset about Cornmarket Street, but the survey is right - there really is very heavy demand."

In contrast, there was a dramatic drop in demand for office or industrial space in the city centre, with companies preferring to move within 10 miles of Oxford.

Last year, two thirds of companies wanted industrial premises more than 10 miles from Oxford, but this year the position was reversed, with 66 per cent seeking to move within the 10-mile zone and only 23 per cent plumping for outer Oxfordshire.

The proportion of industrial companies wanting to stay in Oxford itself slumped from 17 per cent to eight per cent.

David Williams, of Cluttons, said: "There remains a positive attitude to business growth, but companies largely intend to remain within existing premises.

"We interpret this as being due to continued uncertainty in the economy, although the constant demand shows productivity being supported by a strong local economy."

His colleague Fran Mahon said: "The Oxfordshire property market held up better than other areas in the South East during 2003, largely due to sustainable market rents, lack of over-supply of commercial property and a diverse local economy."