A HEAVYWEIGHT team of analysts were assembled by Jones Lang LaSalle for its Midlands Property Predictions event chaired by Jones Lang LaSalle's regional chairman, Jan Thompson.

Jones Lang LaSalle director Andrew Burrell started the proceedings by providing an overview of the economy.

He said: "This year will see a slow start, but hopefully a strong final burst to lift hopes for 2013. The last 12 months have led to a sober reassessment of recovery prospects for the UK economy. It is clear now that the financial crisis and the ongoing fiscal squeeze have left the domestic economy weaker than previously expected."

He continued: "Growth is likely to fall into two phases in 2012. 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-needed 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."

Jones Lang LaSalle's Property Predictions also highlighted that consumers will continue to bear the brunt of the fiscal squeeze in the UK. Consumer spending will be flat at best in 2012, although retail demand will hold up better, as consumers continue to target non-essential services rather than high street goods for cutbacks.

There is not much more buoyancy in other sectors. Office employment will improve, although space demand will remain limited by weakness in the financial and public sectors. Manufacturing output, which had surprised on the upside in 2010-11, is expected to slow sharply next year.

In a risk-averse environment, these subdued trends will continue into 2012. For occupiers, decisions are likely to be delayed as long as the economic outlook is uncertain.

Until that time, cost-cutting, not space expansion, will dominate and leasing activity will remain subdued. The outlook is for investment volumes to remain thin also in the early part of 2012, with activity propped up by equity buyers, such as private and sovereign wealth funds.

As the economy becomes more supportive, there will be the prospect of a revival in occupier demand. With caution still the keynote, this upturn will be driven by structural demand or pre-lets in a market starved of quality supply. A recovery in risk appetite should also lift investment activity, notwithstanding ongoing shortages of debt finance. The thaw is expected to be gradual, with core assets in safe havens such as London offices benefiting first.

The audience of some 200 property professionals also heard that financial pressures on developers in the Midlands should start to ease during 2012, suggesting that spec funding for sheds in the sub-30, 000 sq ft niche could return as the year unfolds.

Matthew Smith, Jones Lang LaSalle's Nottingham office agency director was positive about prospects in the industrial sector. He said "There was funding available for pre-lets, where the lease and tenant are right. However, the sweet spot is small, and the number of potential funders reduces at lots of less than £10 million."

An emphasis on "design and build" in the industrial sector was also predicted due to a lack of good quality stock, with take-up in the region's office market not shifting too far from 2011.

Jones Lang LaSalle dominated transactions in the East Midlands office market in 2011, advising on the 140,000 sq ft acquisition of the former Egg call centre for HeroTSC in Derby; 60,000 sq ft letting to Browne Jacobson; the 45,000 sq ft letting to Potter Clarkson and the 23,000 sq ft deal to Nottingham Building Society, all in Nottingham city centre.

Matt Smith added: "The regional office market will continue to be driven by supply. Jones Lang LaSalle's recent run of key deals have highlighted how the market will react to good quality and correctly-priced opportunities. We anticipate this trend continuing during 2012 due to the shortage of quality space. Our analysis of the regions' forthcoming lease events highlight there is still a reasonable source of demand from occupiers in secondary space. While many will re-gear we consider scope exists to attract occupiers into new space, especially where there are clear financial and operational advantages to their business."

Michael Brough, who heads Jones Lang LaSalle's residential team in the Midlands, said that residential development land is still in demand, but the parameters are very specific, primarily for between 30 and 50 units, on sites of 2-5 acres, with planning permission.

Looking at retail in the Midlands, and the panel of experts believe the trend for "clicks and bricks" operations will continue, and an increasing polarisation between prime and secondary space on the high street will be seen.

Peter Leaver, Jones Lang LaSalle's lead planning director for the region, was also optimistic that the simplified planning requirements for Enterprise Zones, and the concept of Local Development Orders, will ultimately drive employment growth.