Optimism over commercial property development - commercial mortgages

12 February 2007

Although commercial property development within the UK experienced slower growth last month, experts remain optimistic that construction activity will increase.

The latest commercial activity index compiled by Savills fell from 56.1 in December to 51.4 last month, representing the slowest rate of growth in over a year, reports Reuters.

Mat Oakley, head of commercial research at the firm, attributed this fall in activity to a "surprise" contraction in public sector development, although 30 per cent of those surveyed reported an increase in overall activity.

A recent commercial property survey by the Royal Institution of Chartered Surveyors (Rics) revealed that demand from investors, such as those with commercial mortgages, remained high during the fourth quarter of 2006.

Ian McRae, spokesperson for Rics, said that investors are "focussing on rising rental levels and are looking forward to greater income returns in the year ahead".

The survey found that 63 per cent more surveyors reported a rise in investor demand than a fall during the last quarter of the year.