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News Release

London

Official UK bank rate left unchanged at 0.50%

Jones Lang LaSalle comment


London, 5th May 2011 - This move was widely expected in the light of recent disappointing economic news. With much of the recent rise in inflation down to temporary effects and considerable uncertainty about the recovery, it was wise for the MPC to be cautious. But it is only a matter of time before interest rates will have to rise from their current lows. Our view is that the August is now the most likely date for this turning point and that rates will rise to 1% by year's end. This gradual tightening will preserve MPC credibility without derailing the recovery.
 
UK residential property
 
Andrew Burrell, Head of Forecasting at Jones Lang LaSalle, commented:  "The most recent housing news has been less upbeat. UK house prices dropped by 0.2% in April according to the Nationwide. This reinforced evidence from Land Registry showing prices in steady decline since August 2010. Their data also confirm a deep regional divide, with London alone seeing continued price rises. News of an increase in mortgage approvals in March did little to lift confidence against this background.
 
The Bank of England's decision will be welcomed by those active in the residential market, as confidence remains very fragile. Indicators suggest no prospect of a pick-up in activity, with RICS measures continuing to mirror the uncertainty in the wider economy.  This unease and a lack of clear direction in prices are keeping activity muted, with limited supply supporting prices. In the short term, the choice of property on the market will increase marginally, but there is unlikely to be a flood of supply."

UK commercial property
 
Stephanie McMahon, Director UK Research at Jones Lang LaSalle, said:  "2011 has witnessed continued interest from occupiers, however this has not yet translated into deals. Q1 office leasing activity was down 59% in Central London and down 9% across the UK regional markets when compared with the equivalent period last year. Although occupier demand will continue to be dominated by structural events this year we anticipate a growing number of companies launching requirements in the coming months.
 
In almost all markets Grade A office vacancy rates are now below 4% and trending downwards. This is already beginning to drive rental growth with rents increasing in London West End, Glasgow, Birmingham and the Western Corridor.  A further impact is that we expect pre-letting activity to begin warming up. Conversely we still expect further influxes of Grade B space as a result of public sector cutbacks, which may drive interest in the conversion of secondary office stock to alternative uses such as residential, as supported by the recent budget."
 
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