Commercial property development in Britain picked up at its fastest rate in 22 months in March, data showed yesterday, but the rise was not yet seen as a harbinger of potential oversupply.
The Savills Commercial Development PMI survey also showed developers and building contractors were confident that activity would continue rising in the next three months - but slightly less so than in February.
"What the data tells you is that we are going to see a period of sustained increases in supply, because of the month-on-month increases in developers' activity," said Mat Oakley, head of commercial research at property consultants Savills.
Commercial property development includes new construction and building refurbishments.
Mr Oakley said it was too early to talk about brewing excess supply because it was not clear whether developers had overestimated future demand.
"At present I think they probably haven't, but if it continues at this level for the next 12-18 months then that may be an issue," he said.
The report's Total Commercial Activity Index rose to 64.2 in March from 60.6 in February - its sharpest rate of expansion since May 2004.
Anecdotal evidence suggested commercial construction had been supported by benign weather across the country in March, Mr Oakley added.
Private sector activity drove much of the growth, although commercial property development in both the public and private sectors was running above the survey's long-term averages, the report said.
Optimism was strongest for office construction, where the index for expected activity in the next three months slipped to 63.3 in March from 64.5 in February, compared to a 12-month average of 59.4, the PMI data showed.
Quarterly consensus fore-casts published by the Investment Property Forum earlier this year showed leading property investors expected the UK office sector to out-perform retail and industrial property with a total return in 2006 of 13.4 percent.
The survey was conducted by NTC Research, which also publishes several Purchasing Managers' Indexes on Europe's manufacturing and service sectors that are widely tracked by economists and by the investment community in general. The 50 mark divides growth from contraction.