Commercial property development in Britain grew at its slowest rate in 13 months in January due to the first contraction of work on public sector projects in 19 months, data showed on Monday.
Property agency Savills Plc said its Total Commercial Activity index fell to 51.4 in January from 56.1 in December and 62.8 in November. A reading over 50 represents growth.
Although it was the 13th straight month above the 50 mark, it was the second-lowest reading in three-and-a-half years and was weighed down by the biggest monthly contraction in public sector projects since the monthly survey of UK commercial developers began in March 2003.
"While public sector development activity is one of the more volatile elements of our monthly survey, last month's contraction was a big surprise," Mat Oakley, Savills' head of commercial research, said.
"We will have to watch this data for a month or two to establish whether this is a blip, or a sign that public sector purse strings are tightening," he said.
With 30% of survey panellists signalling a rise in activity, office fit-out was the best performing development area for the first time since June 2006.
Panel members were also optimistic that development activity was set to increase in the coming three months, despite the soft start to the year. The monthly survey of leading UK property contractors and developers is conducted for Savills by NTC Research, which also produces widely tracked Purchasing Managers' Indexes on Europe's manufacturing and service sectors.