Savills finds that 23% of commercial developers reported a sharp decline in activity in January

Commercial construction activity has declined for the third month in a row according to a new report by Savills.

In January 23% of commercial developers registered a sharp decline in overall construction activity.

The Total Commercial Development Activity Index - which provides a measure of overall activity in the commercial sector - was -14.5% in January, just above December's survey record low of -15.4%.

The majority of developers blamed the general lack of confidence in the market while others named the credit crunch as a cause of the continuous deterioration.

Developers questioned were most negative about the outlook for the retail and leisure sectors, followed closely by office developments.

Mat Oakley, head of Savills' commercial research department, said he expected activity to improve: “While investor confidence has picked up over the last month, this has clearly not filtered through to developers yet."

"As capital values begin to plateau and the relationship to the cost of money becomes more realistic, we expect developers' confidence and then activity to begin to improve.”