According to Savills’ latest commercial development activity index, development activity continued to fall in July, extending the current period of decline to 21 successive months.

Developers commented that bank lending conditions remained unfavourable and underlying market demand was relatively subdued. A fall in activity was recorded by 22.7% of survey respondents, while just 12.7% signalled a rise. At -10% in July, the resultant net balance of the index pointed to a further reduction of overall activity.

However, the rate of contraction eased since June and remained much slower than at the peak of the downturn in Q4 2008.

Business sentiment in the commercial property sector dipped back inside negative territory in July. Data pointed to a moderate degree of pessimism regarding the three-month outlook for activity. At -8.8% in July, the net balance measuring business sentiment was the lowest for four months. However, the latest reading was well above the record lows seen in 2008.

Commercial developers suggested that weak economic conditions and fragile tenant demand had led to negative sentiment about the business outlook in July.

Reductions in activity were recorded across all nine areas of commercial development monitored by the survey. The steepest rates of decline were recorded for public sector new build, followed by private sector new build.