In the most difficult 12 months for the economy in decades, office markets performed much better thanexpected a year ago. The long slowdown in letting activity and enquiries has been reversed in manymarkets and there are signs of a recovery in rents in London.

The recovery in occupier markets brings a range of challenges and opportunities:

• It remains a tenant’s market. Occupiers face the widest range of choice and the most attractive rentsand incentives for years, though signs of recovery suggest that this may not last for long.

• The performance gap between the capital and the rest of the country will widen in the upturn, withcentral London experiencing the earliest reversal of fortunes and leading the office market in 2010,driven by the financial sector.

• Demand will remain under pressure outside of London as the public sector squeeze begins, thoughcentral government relocations and bank de-mergers could still provide opportunities. Of the majorcentres, Manchester and Bristol are best placed for recovery.

• The worst of the fall in office rents is over. London is likely to be the only market to see prime rentalgrowth in 2010, though it will be several years before recent declines (of -35% on average) are reversed.In the regions, the correction has been milder (at -10%) and growth will take longer to return.

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