Rental declines were experienced in Brussels and London's WestEnd (both at -3.4%), but the report added that that West End primerents are readjusting after unusually strong growth last year.

Rents rose in Lyon (4.7%) and Madrid (1.0%). Rental values wereunchanged in all other indexed cities. Considerable investment fromreal estate funds, equity valuations and asset-backed securitiesare relying on a European office rental recovery. In anticipationof recovery, there have been huge capital flows into the sector inthe past few years that have pushed yields down and boosted capitalvalues.

"The economic drivers for Europe's office markets are positivebut nevertheless are proving to be patchy across Europe with mostcountries expected to experience slower economic growth in 2005than in 2004," says Nigel Roberts, head of European research atJones Lang LaSalle. "With continued low interest rates, especiallyin the euro zone, leveraged investment continues to lookattractive, but with slower economic growth a broadly basedrecovery in the rental markets may take longer to materialize."

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