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The sluggish economic recovery in the UK is continuing to take a toll on the country's commercial real estate markets, according to Jones Lang LaSalle's latest property forecasts.

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 the latest forecasts. A lack of debt finance, coupled with the ongoing uncertainty in the wider eurozone region, has further heightened investor caution, JLL said.

Andrew Burrell, head of forecasting at JLL, commented: 'Against this economic backdrop, our total returns forecasts for 2012 have been revised down, with all property returns at 2% compared with an historic average of 9%. Performance across sectors is expected to be mixed. High street shops will be weakest, with negative total returns of 3.3% this year. By contrast, London West End and City offices will outperform in 2012, with total returns of 5.8% and 4.5% respectively. The industrial sector is expected to show modest returns of 2.6%, with standard industrials outperforming distribution warehousing.'

JLL's research also shows that the pace of rental growth in the office sector is expected to exceed that of both the industrial and retail sectors. London's West End will continue to lead rental growth in the office sector, averaging 4.9% growth annually over the next five years, as the supply of prime stock remains constrained and demand from occupiers and investors stays strong. By contrast, offices in the rest of the UK will show further rental falls this year, weighed down by the weak demand for secondary properties.

Mark Jones, director in JLL'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.'