Commercial development activity falls at the sharpest rate in over five years.

  • Over five times as many commercial developers (40%) noted a reduction in total activity as those that reported a rise (7%) in June.
  • The resultant net balance  –  the Total Commercial Development Activity Index – posted -32.4% in June, down from -19.7% one month earlier. The figure pointed to a sharp fall in commercial development activity and was the lowest reading in the survey history.
  • Survey respondents signalled that deteriorating levels of demand, resulting from uncertainty and poor credit availability had caused June’s steep decline in activity.

FUTURE EXPECTATIONS

  • Companies in the UK commercial property sector were extremely pessimistic in June. Almost half of all respondents believed that their activity levels would decline over the coming three months, against under 8% that anticipated an increase.
  • Although negative sentiment was broad-based across all sectors, it was most apparent in the Retail & Leisure sector which posted a net-balance of -43.4%.
  •  Panellists explained that the current unfavourable economic situation was the main basis for their pessimism. A number also reported that they lacked confidence in the government’s ability to rectify the situation in the foreseeable future.

COMMERCIAL ACTIVITY & THE UK ECONOMY

  • To the right is a comparison of the three-month trend in the survey’s Total Commercial Development Activity Index against the UK PMI Composite Output Index, a monthly indicator of overall activity in the UK economy.
  • The comparison indicates a close relationship between the performance of the UK commercial property sector and the wider economy over the past five years.
  • The chart shows that the recent downturn in commercial development has been accompanied by a slowdown in the UK economy. June PMI figures indicated a drop in total UK private sector output for the second month in a row, and at an accelerated pace.

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Commercial Development Activity - Jul 08 PDF