The UK commercial property sector continued to deteriorate at an increasingly rapid rate last month, new research by Savills has shown.
Its Total Commercial Development Activity Index fell in November for the 13th month in a row, with the rate of decline slightly steeper than in October.
As the credit crunch began to bite, weakening occupier demand led to a new series-record decline in development activity.
Almost 58% of respondents to Savills commercial property survey reported a drop in activity, compared with just 7% signalling a rise.
The index showed a resulting net balance of -50.3% in November, down from -49.7% in October.
The fastest reduction of activity was in private new build. Office development was particularly hard hit. For the fifth time in 2008, however, the least marked fall in activity was shown by refurbishment.
November’s survey also found widespread pessimism about the three-month outlook for activity, with the degree of negative sentiment the lowest since the survey began in March 2003.
Commercial developers said they remained concerned over the extent to which lower central bank rates can alleviate the downturn in the sector over the near term as a result of continued lack of credit availability, and a reluctance of clients to commit to new projects.
Commenting on the November survey, Mat Oakley, head of Savills’ commercial research department, said the negative outlook was surprising: “This month’s survey was surprising in the fact that developers’ expectations for the future continued to slide.
“While the lack of debt available is clearly a dragging factor on the market, we expected that November’s 150bp cut in the base rate might give developers some confidence that the downturn in occupier demand would be shorter and less deep than it could have been,” he added.