The latest data from Savills indicate that UK commercial development activity declined in August at the sharpest rate for 14 months. This reflected a further steep fall in public sector development, alongside a decrease in private sector activity for the first time since July 2009.
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The fastest declines in activity were registered in public sector new build and public sector office development.
Almost 28% of commercial developers reported an overall fall in activity during August, compared to around 15% that signaled a rise. As a result, the Total Commercial Development Activity Index a net balance monitoring the overall performance of the UK commercial property sector posted -13.3% in August, down from +0.6% in July and well below the average for the year to date (+0.7%).
Future expectations
At -13.4% during August, from -1.2% in July, the index measuring expectations for activity over the next three months fell sharply to its lowest since February 2009.
Commercial developers indicated that concerns about the property market outlook had contributed to negative sentiment in August. Some firms also cited bank lending difficulties and worries about the outlook for the wider economy.
Survey respondents anticipate lower levels of activity in all three monitored areas of development, with firms particularly downbeat about the outlook for office activity in the next three months.
Summary of activity
August data signaled lower levels of activity in eight of the nine broad areas of commercial development monitored by the survey. Refurbishment was the only exception, with activity rising at a moderate pace. The fastest declines in activity were registered in public sector new build and public sector office development. Only slight declines were recorded in private sector retail and leisure, industrial/warehouse activity and private sector new build.
Commenting on the August survey, Michael Pillow, Head of Building Consultancy at Savills said: "Increasing caution about the prospects for tenant demand and rental growth are weighing on developers' confidence. Much of this is down to continuing uncertainty about the depth and scope of the imminent public sector spending cuts. While the news in October may not be good, the removal of speculation and uncertainty should deliver a boost to developers' confidence."
Source: Savills
Future expectations
At -13.4% during August, from -1.2% in July, the index measuring expectations for activity over the next three months fell sharply to its lowest since February 2009.
Commercial developers indicated that concerns about the property market outlook had contributed to negative sentiment in August. Some firms also cited bank lending difficulties and worries about the outlook for the wider economy.
Survey respondents anticipate lower levels of activity in all three monitored areas of development, with firms particularly downbeat about the outlook for office activity in the next three months.
Summary of activity
August data signaled lower levels of activity in eight of the nine broad areas of commercial development monitored by the survey. Refurbishment was the only exception, with activity rising at a moderate pace. The fastest declines in activity were registered in public sector new build and public sector office development. Only slight declines were recorded in private sector retail and leisure, industrial/warehouse activity and private sector new build.
Commenting on the August survey, Michael Pillow, Head of Building Consultancy at Savills said: "Increasing caution about the prospects for tenant demand and rental growth are weighing on developers' confidence. Much of this is down to continuing uncertainty about the depth and scope of the imminent public sector spending cuts. While the news in October may not be good, the removal of speculation and uncertainty should deliver a boost to developers' confidence."
Source: Savills
