Growth in the public sector commercial development sector in July was at its lowest level for the year, according to research by property services firm Savills.

A decline in public sector retail and leisure development and a flat office market brought about the fall in growth. However, in each of the previous three years public sector work has actually contracted in the summer months.

Matt Oakley, head of commercial research at Savills, said the fall in public sector leisure growth was easily explained. He said: “A local authority might need to get its swimming pool or sports centre completed in time for the school holidays, leading to a fall in work straight after.”

The overall trend remained positive, with seven of the nine sectors surveyed still showing increases in work, although total commercial work was slightly less than June.

The strongest sector was private office development, with refurbishment work not far behind. Oakley said this trend was a result of an increase in speculative development and so growth increases were dependent on a similar increase in demand for office space.

He said: “There are some market concerns about speculative development activity, particularly in London and the South-east. There might be more caution in the second half of the year and early next year.”

There is some evidence that this has already started. The survey breaks the UK down into London, the South-east and the rest of the country. Commercial developers in each of these three regions had the weakest positive sentiment about their business prospects for the next three months recorded so far in 2006.

Also, commercial activity growth in London and the South-east was down on June, with the rest of the UK experiencing an increase.

The research is based on a monthly questionnaire completed by executives at more than 200 construction and development companies.

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