Another record-breaking year in CEE investment market

The property investment market in CEE shows signs of being another record-breaking year in 2006. Transaction activity in the first half of 2006 in the more established markets ? Bulgaria, Czech Republic, Hungary, Poland, Romania, Russia and Slovakia ? reached Euro 3.9 billion.

This surpasses the total investment volume witnessed in the same period during 2005, accounting for 21% of total investment in the region since 1998.

The last 2.5 years account for over 75% of total investment alone. The majority of first half 2006 investment was once again in offices (43% of total volume) and retail assets (40% of total volume), 75% of which are shopping centres. In fact, over 83% of the total investment volume in CEE has been in office and retail property. The remaining 17% has been split evenly between mixed-use, industrial and hotel property. These other property sectors have the most untapped potential, although a large proportion of industrial stock is typically held by developers in their own portfolios or by bespoke distribution facilities and service providers.

As the geographical exposure of investors widens there has been a noticeable shift in the proportionate distribution of funds across the CEE region.

Although the bulk of funds invested remains in the core Central European markets ? the Czech Republic, Hungary and Poland ? comprising 79% of the market, this is down on 2005 levels by 8%. Russia has become a more noticeable recipient, accounting for 7% of overall CEE investment.

Prime yields for all property sectors in CEE continue to fall. In the core office markets yields show signs of slowing as they close on the EU-15 average. The newer ?emerging? markets still show room for further compression as these markets improve economically and in terms of transparency.