Commercial demand slows after three-year peak

Growth in the commercial property market slowed in April after March’s three-year high, according to the latest figures from property adviser Savills.

Savills’ data shows that the commercial development index fell to 59.7 in April from 66.2 in March. However, the market remained robust, with the index above the 58.4 average.

The slowdown was particularly felt in London, where the index, at 54.2, was the lowest in 16 months.

Most growth occurred outside the South-east. Almost 37% of respondents to the survey, which included executives across the commercial property sector, reported an increase in activity in the rest of the UK.

However, figures showed that growth of total commercial activity eased in all three regions monitored: London, the South-east and the rest of the UK.

The private sector outperformed the public sector for the third month in a row, although the pace of expansion eased. This reflected the slower growth of work in private sector office, retail and leisure, and new-build projects.

Activity expectations for the three months ahead are buoyant, with 31% of respondents to the survey expecting a rise in office activity, compared with the 6% who expected a fall. Commercial developers signalled that the strongest growth prospects were for office construction.

Mat Oakley, head of commercial research at Savills, said: “This month’s data on activity and expectations indicates that development activity in the UK continues to grow and expectations are positive, despite the impending interest rate rise.”

n Construction output overrall has expanded during the first three months of the year, according to the latest joint survey report by the Construction Products Association and Construction Confederation. Industry growth is expected to gather momentum during 2007, benefiting from private sector investment and a pick-up in public sector work.