UK commercial development fell for the first time in three months, reflecting sharp drop in public sector activity.

KEY FINDINGS

• Total commercial development activity declined slightly in June, following two months of continuous growth.
• Public sector activity fell at the fastest rate since January 2009, but private sector development increased for the eleventh month in a row.
• Just under 22% of commercial developers signalled a drop in overall activity in June, compared to 19% that indicated 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 -2.8% in June, down from +4.1% in May and the lowest for eleven months. The net balance on average in Q2 was +1.8%.

FUTURE EXPECTATIONS

• At +5.3% in June, down from +8.6% in May, the index measuring future expectations in the commercial development sector was the lowest for eleven months.
• The latest reading signalled only a modest degree of optimism that business activity will rise in the next three months.
• Anecdotal evidence suggested that bank lending constraints and concerns about public sector demand had weighed on confidence in June.
• By sector, developers are most upbeat about industrial/warehouse activity and least confident regarding office development.

SUMMARY OF ACTIVITY

• Commercial developers signalled lower levels of activity in four of the nine broad areas monitored by the survey .
• The sharpest reductions were registered in public sector office development and public sector new build respectively.
• Meanwhile, the fastest rises in activity were in refurbishment and industrial/warehouse development.
• The gap between the highest net balance (+9.0%) and the lowest (-30.0%) was the widest since the start of the survey in March 2003.