Public sector contributes to further fall in development activity – Savills
There was a further marked deterioration in UK commercial development activity in June, says Savills in its latest update on the market. The firm’s Total Commercial Development Activity Index rose last month from the minus 13.8% reading in May, but the minus 9.6% reading for June is still showing a sharp reduction in activity levels.
Savills says 25% of those surveyed for its index reported a decline in June activity from the previous month, while 15% noted an increase. The fall in public-sector activity was particularly noticeable with a net balance of minus 22.8% reported – a six-month low. The net balance for private-sector activity in June was minus 1.6%, an improvement from the minus 12.3% recorded in May.
On average, commercial developers were negative about the short-term outlook, for the first time in six months. When Savills questioned them about the reasons why, those surveyed gave anecdotal evidence suggesting that heightened economic uncertainty, partly reflecting the ongoing eurozone debt crisis, had had a dampening effect on business confidence. The net balance of future expectations for the coming three months was minus 0.3% for June, signalling only a mild level of negative sentiment overall.
Within the market for office space, there were reductions in both private-sector and public-sector activity. The net balance for public-sector offices activity, at minus 20.5%, indicated a sharper fall than for the private sector (minus 10.2%). Private-sector leisure and retail sector activity also continued to fall in June, with a net balance of minus 4.9%, while public-sector activity in this market has now been falling for 28 straight months. There was also a sharp decrease in activity relating to industrial units and warehouse property in June, with a net balance for this sector of minus 11.1% compared with minus 3.3% in May.
