Property development surge in London

Commercial property development in London accelerated at its fastest rate in more than 2 years in May, but the overall rate of growth in British activity was its slowest so far this year, data out today showed.

Mat Oakley, Savills' head of commercial research, said the sharp rise in developments in London, mainly in the office sector, made sense because vacancy rates in the capital were tumbling and demand for office space was rising.

"However, too many speculative developments starts over the next two years could store up problems for later in the cycle," Oakley said.

The Savills Commercial Development PMI index fell to 58.3 in May from 60.9 in April, marking a fifth straight month of growth in Britain as a whole but the least marked rise so far this year, while the rate of expansion in London hit a 26-month high.

The survey was conducted by NTC Economics, which also produces widely-tracked Purchasing Managers' Indexes on Europe's manufacturing and service sectors.

As with NTC's other surveys, the 50 mark divides growth from contraction.

The Savills survey also showed leading British property developers and contractors remained highly confident about the outlook for the next three-months, particularly for office projects, with office re-fits currently showing the fastest rate of expansion.

- REUTERS