Refurbishment projects are continuing to keep the commercial sector afloat after development activity fell last month at its sharpest rate in a year and a half.
Around 28 per cent of commercial developers recorded a fall in activity in September, according to a poll by property agents Savills, with just 14 per cent indicating a rise.
The Commercial Development Activity Index measured a net balance of -13.8 per cent in September - the lowest since spring 2009.
The net balance of developers reporting a rise in public sector activity dipped to -31.6 per cent in September, while the decrease in private sector development was comparatively moderate at -4.5 per cent.
However, refurbishment activity rose for the 14th successive month. Approximately 15 per cent of commercial developers reported a reduction in refurbishment, compared with about 18 per cent that indicated a rise.
Savills head of building consultancy Michael Pillow attributed this to the impending shortage of prime office space in the City as a large number of high-profile leases expire over the next five years.
He said: “These are buildings constructed during major periods of development in the 70s and 80s that are coming to the end of their life cycle. Something has to be done with them.
“The development pipeline is frozen so these buildings need to be redeveloped when they become obsolete. On top of this, the better clients want environmentally efficient buildings these days.
“While tender prices are right down, if you plan it right, a quality green [refurbishment] doesn’t have to cost more than a standard one.”
Commercial developers remained pessimistic about business prospects over the three months ahead, citing the lack of available bank credit and cuts in public spending as the main causes of concern.
Mr Pillow said: “Developers, like everyone else, are worried about the impact of public spending cuts on their business in the future.
“Speculation and botched announcements of austerity measures will do nothing to help confidence. We can only hope that [the Comprehensive Spending Review on] 20 October brings the clarity that allows property developers to make informed decisions about project viability.”
There are hopes that London could be on the verge of a new wave of skyscraper building - but developers are waiting before finalising a number of projects.
Construction News last month reported the Pinnacle was set to rise above ground. It is now clearly visible at street level and is thought to have secured funding for a few more months’ building.
Land Securities has plans to build the £350m Walkie Talkie and British Land is reportedly looking to restart its Cheesegrater development but both are thought to be waiting on joint venture funding.