COMMERCIAL DEVELOPMENT HIGHEST FOR 12 MONTHS
(10 March 2006)

Latest data from the Savills Commercial Development PMI® survey signalled the sharpest expansion of commercial activity for a year in February. The rise was principally driven by a marked increase in private sector projects, which rose at the strongest rate since January 2005. Commercial developers also reported robust growth of public sector activity. Of the nine areas of commercial development monitored, seven reported expansion of activity. The sharpest growth was indicated for private sector office activity.

Panellists indicated a high degree of optimism regarding growth for the coming three months. The strongest rise was anticipated in industrial/warehouse activity, where business confidence reached a twenty-two month high in February. Anecdotal evidence suggested that new development projects and an improvement in market conditions had raised expectations.

Commenting on the survey, Mat Oakley, head of Savills’ Commercial Research department said: "It is evident from this month’s survey that the commercial property market is firmly on the path of recovery. The prospects of strong upward rental growth in the office market after a few years of negative growth is evidently a powerful driver of developers’ expectations and activity."

Key findings for February 2006:

• The Total Commercial Development Activity Index posted 60.6 in February, up from 59.1 in the previous month.
• Around 27% of survey respondents reported a rise in commercial development, compared to just 6.1% that indicated a fall. The latest reading signalled a marked increase in overall activity and the sharpest expansion since February 2005.
• Growth of private sector activity registered a thirteen-month high in February and continued to rise at a sharper pace than public sector development.
• For the first time since May, regional data signalled that growth was the sharpest in the Rest of the South East.
• London showed the weakest improvement for a second successive month in February, whilst the Rest of the UK continued to register a marked rise in activity.
• Panel members continued to signal a high degree of positive sentiment regarding future growth. Business confidence for the coming months was highest for industrial/warehouse activity.
• Seven of the nine broad areas of commercial development being monitored indicated an expansion of activity in February. Commercial property developers reported that growth was sharpest in private sector office activity, followed by ndustrial/warehouse. Public sector retail & leisure was the only area where a decline in activity was recorded.

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