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Jones Lang LaSalle’s latest property forecasts indicate that the sluggish economic recovery is continuing to take a toll on UK commercial property markets. The UK economy slid back into technical recession in the first quarter of 2012 and is expected to grow by under 0.5% for the whole of 2012, according to latest forecasts. A lack of debt finance, coupled with the on-going uncertainty in the wider Eurozone region has further heightened investor caution.
Mark Jones, director in Jones Lang LaSalle’s Strategic Asset Management team, added: “The recovery in the retail sector is expected to lag other sectors, with further rental falls expected in 2012 before showing modest recovery from 2013 onwards. Retail warehouses are anticipated to perform better than standard shops and shopping centres, with rental growth averaging 2.7% per annum over the five-year period. A lack of debt finance and weak tenant demand are expected to lead to further downward pressure on rents outside of retail warehousing and Central London shops.”
Mark concluded: “We expect all property capital values to fall by -3.7% this year, given declining rents and rising yields. Equivalent yields will show further outward shift in 2012, given the challenges facing secondary markets. Yields will then remain broadly stable in 2013 before drifting upwards again in the last few years of the forecast to reflect the expected rise in interest rates and bond rates.”
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