UK commercial activity rises at slowest rate in almost three years.
■ The headline Total Commercial Development Activity Index – a net balance monitoring the overall performance of the UK commercial property sector – dropped to a 35-month low of +4.5% in December (from +8.7%).
■ The combination of a sharper drop in public work and the slowest rise in private projects since May 2013 resulted in a weaker overall growth rate.
■ Positive net balances were seen in six of the nine monitored categories, the exceptions being public office, public retail & leisure and public new build.
■ The annual average for 2015 (+12.6%) showed that the performance of the sector lagged behind that seen in 2014 (+25.0%).
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FIGURE 1Total Commercial Activity
Source: Markit, Savills Research
■ The level of positive sentiment among UK commercial developers improved for the second successive month in December.
■ The net balance climbed from +10.4% in November to +11.8%, moving further away from October’s two-and-a-half year low.
■ The main sources of optimism were identified by panellists as new project opportunities and forecasts of a pick-up in client demand over the coming three months.
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FIGURE 2Commercial Development Activity, Three-Month Outlook
Source: Markit, Savills Research
■ The chart below shows a three-month average of the Savills Total Activity Index against UK GDP data.
■ Falling from an average reading of +11.0% in Q3 to +8.5% in Q4, the net balance measured by the Savills survey highlighted the weakest rate of expansion in commercial work since Q1 2013.
■ This indicates that the sector is likely to record a softer increase in GVA during the final quarter of 2015.
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FIGURE 3Savills Total Commercial Development Activity Index vs. UK Gross Domestic Product
Source: Markit, Savills Research
■ UK commercial developers signalled a further expansion in total commercial activity during December, but the growth rate eased to the weakest since January 2013.
■ Public work fell at the quickest pace in almost three years, while private projects increased at the softest rate in 31 months.
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■ Following an increase in November, public office activity declined during December. Down to -8.2%, the net balance was at a 37-month low.
■ December data highlighted a fortieth successive monthly rise in private office work. Having moderated to the weakest since August, the rate of expansion was marginal.
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■ After rebounding in the prior month, public retail & leisure projects decreased in December. The net balance dipped to its lowest mark since January 2013.
■ Growth of private retail & leisure work softened to the slowest since August. The net balance fell from +9.8% to +7.6%.
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■ Public new build activity decreased for the seventh straight month in December and at the quickest rate in three years. The net balance was at -12.7% (November: -5.5%).
■ Stretching the current growth sequence to 40 months, private new build projects rose. Having accelerated to the fastest since June, the pace of expansion was sharp.
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■ December saw industrial/warehouse projects increase further, thereby taking the current sequence of expansion to 40 months.
■ However, the net balance dropped from +20.6% in November to +12.2%, its lowest mark since May 2013.
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■ Refurbishment activity in the UK commercial property sector continued to rise in December, marking a 40-month sequence of expansion.
■ Although the slowest since September, the rate of growth was solid as signalled by the net balance recording +11.8%.
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■ December data pointed to an eleventh successive monthly rise of office fit-out activity in the UK.
■ A net balance of +6.8% of commercial developers signalled growth, compared with +7.3% in November.
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■ Growth of UK commercial activity eased to the slowest in almost three years during December, reflecting a sharper drop in public work and a weaker increase in private projects.
■ Six of the nine tracked categories recorded growth, the exceptions being public office, public retail & leisure and public new build.
■ The only net balance to rise over the month was that for private new build. At +16.0%, the latest reading was indicative of a sharp pace of expansion that surpassed all other categories.
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■ Growth of commercial activity was maintained across the three monitored UK regions in December.
■ Rates of expansion accelerated in London and the South East, while a moderation was recorded in the ‘Rest of UK’.
■ The strongest monthly increase was registered in the South East, where the net balance of +25.0% was the highest since June.
■ The South East was the only region to see the net balance for December record above its respective three-month average.
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