BRITAIN'S 17-billion-pound (US$33-billion) commercial construction industry will shrink next year as banks refuse to finance office blocks and demand from tenants weakens, according to the group that represents 85 percent of the country's building-material firms.
"It's not looking great," Noble Francis, economics director at the Construction Products Association, said in an interview with Bloomberg News. The industry will record a "slight" contraction next year, the first since 2003, followed by two years of deeper decline, he said.
As much as 40 percent of planned shopping-center space will be abandoned or delayed over the next five years, said Mat Oakley, head of commercial research at real estate broker Savills Plc in London. As banks restrict lending in response to the credit squeeze, companies are cutting back on expansion.
"The order books for the commercial sector are considerably down on last year," Francis said in the telephone interview in London.
Commercial property values declined 14 percent in the 12 months ended March 31, according to Investment Property Databank Ltd, and may fall further as the slowing economy makes tenants reluctant to pay higher rents or lease space.
Because it can take as long as two years to get planning consent, commercial real estate development follows a "feast or famine cycle" that lags behind the performance of the economy, said Michael Prew, a London-based analyst at Lehman Brothers Holdings.