Activity levels fell again in December – Savills
Development activity in the commercial property market contracted again during December, says Savills. The firm’s latest monthly Commercial Development Activity index – a net balance monitoring the overall performance of the UK commercial property sector, was at minus 8.9% in December, down from minus 6.0% the previous month.
There was a small increase in activity in the private sector (+3.2%), but public-sector commercial development decreased again (-28.2%) – for the tenth month in succession – and the fall in December was “notably sharper” than the long-run trend for the series, Savills noted.
On the positive side, the recent pessimism among commercial property developers appears to have lifted last month, with developers expressing confidence about the three-month outlook for business prospects. Those surveyed expect activity to rise in all three categories monitored – office (+3.8%), retail (+9.3%) and industrial (+5.9%). This is the first time the expectations component of the survey has been positive for the office and retail sectors since June 2010. Industrial-related activity has been forecast to rise for the past two survey periods.
Nevertheless, the positive sentiment is still at a modest level (+6.2% overall) and the worries about bank lending, the rise in VAT and public-sector spending cuts have not gone away.
Within the offices sector, public-sector development (-24.7%) continued to fall sharply in December, while the decline in private-sector activity (-6.4%) eased slightly from the previous month (-9.9%). The long-run trend continues to signal modest growth, however. Activity in the retail sector among private-sector developers grew slightly (+1.1%), for the second month in a row, in contrast to the contraction in public-sector activity within retail (-17.7%). The level of activity in the industrial sector was flat month-on-month, having increased for two straight months.
