Jones Lang LaSalle has published its 2013 Property Predictions, which reveal that it will be a transitional year for the UK economy as recovery is slowly re-established.
Commenting on the firm's annual research, Guy Grainger, UK Chief Executive at Jones Lang LaSalle, said: "There have been some brighter signs of late. The UK economy appears to be creating jobs at a much healthier rate than the GDP figures suggest and even output rebounded in 2012 Q3. This was the Olympic quarter and boosted by several one-offs, but perhaps a corner has been turned. The global situation still has signs of uncertainty, although an uneasy balance is being maintained in the Eurozone. Inflation rates have also fallen substantially over the last 12 months and there is an improved outlook for consumer spending. However, the broad consensus is that the UK economy is going nowhere fast and that growth in 2013 will be subdued. GDP is forecast to rise to by about 1% in 2013, better than 2012, but not great by historic standards."
Andrew Burrell, Head of UK Forecasting at Jones Lang LaSalle, added: "A couple of forces for recovery stand out. Firstly, a gradual improvement in consumer demand is forecast as real incomes benefit from higher employment and lower inflation, with price increases falling toward the government's target for the first time since 2009. Second, strong corporate balance sheets are expected to boost business investment as sentiment slowly rebuilds. Nonetheless with confidence still fragile, any upturn in demand is likely to be faltering, at least until later in 2013."
Jones Lang LaSalle's Property Predictions also reveal that there remain challenges from global uncertainties. In the US, a short-term compromise has been reached to avert a fiscal crisis, though this is only a temporary solution to a problem that could throw their economic recovery into sharp reverse. The Eurozone crisis has certainly eased, but tensions could re-emerge at any time. 2014 will see critical German elections and further challenges ahead in balancing fiscal cutbacks against the need for growth in the beleaguered fringe economies.
In recent years, the pain has not been evenly shared across the UK. London has been most resilient and is where much of the recent jobs impetus has been concentrated. The capital is expected to drive the UK economy in the recovery led by its world-leading business services sector. The rest of the country bore the brunt of the recent downturn, but there too, growth re-starts in 2013, albeit at a fairly modest pace.
Guy Grainger concluded: "In short, the next 12 months are unlikely to bring a dramatic turnaround. But, in a year's time, the foundations for recovery should be in place and some light will be visible at the end of the tunnel. For property markets the implications are clear. Demand will respond slowly to the economic thaw as occupier confidence rebuilds. Even with limited quality space in many markets, rents are unlikely to see much uplift, outside of central London office and retail. The fall in IPD capital values has slowed of late, but further outward movement in average yields is likely, at least at the start of 2013. Cautious global investors are likely to stick to prime buildings in liquid, international markets, implying limited interest outside of core assets in the capital. Of particular interest is whether 2013 will herald a slow return to development as supply of new grade A space falls to historic low levels across most sectors."