Private sector projects buoy up May’s commercial market

Private sector new build spurred growth in the commercial market in May, according to data from property adviser Savills.

Its figures show that the commercial development index rose to 61.0 in May, compared with 59.7 in April. The figure remains far above the 50.0 no-change mark, highlighting the continuing strength of the UK’s commercial market.

The latest growth follows a slight slowdown in April, when the index fell compared with March’s 66.2, which was the highest in three years. The expansion was fuelled by private sector development, which continued to rise at a faster rate than the public sector. Private new build was the best performing area, with the index rising to 64.7.

There was also a robust increase in work on public sector projects during May. About 13% of respondents to Savills’ survey of executives in the commercial sector reported a rise in work.

In the public sector, retail and leisure activity fell for a second month running, but the rate of contraction remained marginal.

For the fourth month running, the sharpest expansion of commercial development was recorded outside London and the South-east, although total growth activity accelerated across both regions during May.

Commercial developers were optimistic about continued growth, with optimism strongest in the commercial office market. Some 31% of those surveyed envisaged a rise in activity despite the concerns of some developers over rising interest rates.

Mat Oakley, head of Savills’ commercial research department, said: “With the growth in volume of development remaining high in May and expectations for further increases staying positive, it is evident that the increase in the base rate in May has not dented developer optimism. Whether this will be the case if they rise again in the next few months remains to be seen.”