Building activity in the UK commercial property sector continued to slow in July as developers struggled with the impact of the global credit crunch, new figures show.

According to the latest Total Commercial Development Activity Index from property services group Savills, construction rates in July fell for the ninth month in a row, hitting a record low in the five-year history of the report.

Furthermore, of those contractors and developers polled by the company, a majority expressed pessimism over the three-month prospects for the commercial sector, particularly when it comes to the construction of office buildings as many businesses opt to downsize in the current economic climate.

Despite this, the Savills expectation index was found to be four percentage points higher than in June, with some observers believing that the worst may be over.

Mat Oakley, head of the firm's commercial research, said: "While the slight easing in the degree of pessimism about the future might be a sign that the end of the current downturn may be in sight, we do not expect activity or confidence to improve dramatically until the credit squeeze starts to ease."

At the same time, the new IPD Regeneration Index has revealed that total returns on commercial property investments are currently 2.6% lower than the average for 2007.