12 August 2008
Activity falls at new survey record pace, led by steep decline in private sector development.

In July, around 40% of commercial developers indicated a reduction in overall activity compared to one month earlier, while just 6.6% reported a rise.

Key Findings:

• The resultant net balance - the Total Commercial Development Activity Index - fell to -33.8%, from  -32.4% in June. July's reading was a new survey record low and signalled a sharp reduction of activity.
• Private sector development declined at a far steeper pace than public sector activity in July.
• Anecdotal evidence suggested that the ongoing global credit squeeze and falling economic sentiment were the main factors behind the latest drop in activity.

Future Expectations 

Companies in the UK commercial property sector remained highly pessimistic about the business outlook in July, although the degree of negative sentiment eased since the previous month.
Negative sentiment was again broad-based across the three areas of activity monitored by the survey, with data indicating the bleakest outlook for office development projects.

Survey respondents widely anticipate that deteriorating economic conditions will contribute to a further reduction of market demand in the three months ahead.

Commercial Activity & The UK Economy 

To the right is a comparison of the survey's Total Commercial Development Activity Index against the Construction PMI Housing Activity Index, a monthly indicator of residential building in the UK.

The chart highlights that activity levels in both the housing construction and commercial development sectors have declined rapidly in recent months.

The marked downturn in the performance of UK house building and commercial construction sectors over the past year are closely linked to the start of the global credit squeeze and subsequent property market slowdown.

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