The amount of commercial development in the UK has fallen to its lowest level in five years, Savills reported today.

Development activity is now at its lowest since March 2003, when Savills and NTC Research, the business research firm, began the Commercial Development Activity Index.

Almost one-third of commercial developers reported a fall in overall activity in April, compared with just 12% that signalled a rise.

In April the index fell to a record -20.8%, down from -16.4% in the previous month.

April’s sharp decline in commercial development was widely attributed to unfavourable operating conditions.

Developers commented on uncertainty about the prospects for the UK economy, the ongoing credit squeeze and weaker market demand.

Future expectations

The Future Activity Index fell to -32% in April, from -19.6% in March, its lowest level in the 62 month history of the series.

Savills said respondents were highly pessimistic about the three-month outlook for all three types of development activity monitored by the survey: offices, industrial and warehouse and retail and leisure activity.

The research said anecdotal evidence suggested that deteriorating market conditions had dented business sentiment in April. Some developers also commented that the completion of existing projects would lead to a fall in activity during the next three months.

Mat Oakley, head of Savills' commercial research department, said: ‘The steady stream of bad news relating to the effects of the credit squeeze on the wider economy is clearly impacting on developers’ confidence. Until the debt market eases, and uncertainty about tenant demand relaxes, we expect developers to remain cautious.’