JLL sees slow start for UK market but brighter prospects in H2

Jones Lang LaSalle expects the UK market to get off to a slow start in 2012 now that the financial crisis and the ongoing fiscal squeeze have left the domestic economy weaker than previously expected. However, Richard Batten, Executive Chairman UK at Jones Lang LaSalle is hopeful that a strong final burst will lift prospects for 2013.

'Growth is likely to fall into two phases in 2012,' he said in a forecast for the coming year. 'The first six months are expected to be flat at best, with the possibility of a slight dip. But the second half should be brighter. Hard evidence on the direct economic effects of international sporting events is patchy, but they often mark a turning point in sentiment. It is hoped that the London Olympics will provide a much-need boost to confidence. This along with the benefits of another burst of asset purchases by the Bank of England should begin to have an economic stimulus after mid-2012, when activity is expected to improve, albeit fairly slowly.'

In its Property Predictions, Jones Lang LaSalle foresees subdued activity in all commercial real estate sectors this year, with occupiers likely to delay decisions as long as the economic outlook remains uncertain. Until that time cost-cutting, not space expansion, will dominate and leasing activity will remain subdued, the report concluded. As a result, investment volumes are likely to remain thin in the early part of 2012, with activity propped up by equity buyers, such as private and sovereign wealth funds. Any thaw is expected to be gradual with core assets in safe havens such as London offices benefiting first.

Andrew Burrell, Director - EMEA Research concluded: 'This will not be a vintage year for rental growth, especially in the difficult early months. But the shortage of quality supply should continue to underpin headline rents in prime markets, albeit with incentives remaining generous. The rate of increase is set to moderate in all sectors, with prime offices, notably those in Central London, seeing the most marked slowdown in 2012. Average rents have not seen as strong a recovery as prime thus far, but also show modest year-on-year increases. Overall commercial sectors show much greater rental stability than during the global downturn of 2008-09.'