Robust, regionally

Continued demand for office space and growing supply characterized Central and Eastern European occupier markets in the first half of 2008, according to research recently conducted by commercial real estate advisor CB Richard Ellis.

Although the regional vacancy rate rose slightly in the period - due to the growing supply, the study noted - some of the region's markets actually saw vacancy drop and rents increase. The Kiev, Moscow, Warsaw and Prague markets were among those which experienced substantial increases in rents, due to limited available supply, strong take-up and limited pipelines. Rents grew by 27, 13, six and five percent in those cities, respectively, compared with rents in H2 2007.

Despite the global economic slowdown, the occupier markets in Central and Eastern Europe should see further growth in the remaining part of the year too, CB Richard Ellis analysts said, although regional fluctuations are to be expected. The conditions of individual CEE markets will strongly depend on the number of project completions. Experts anticipate that a new wave of office projects will be delivered in the region within the next two years.

"Generally speaking, office markets across the CEE region are expected to remain strong in 2008," said Jos Tromp, regional manager of CEE research at CB Richard Ellis. "Yet variations in expected office completions might mean that sector performance may fluctuate across different CEE markets. How much of the office space pipeline is completed in the next few years will have a strong effect on the direction of many office markets in the CEE region," he said.

Tromp added that sizable pipelines in some smaller office markets could potentially lead to imbalances and make those markets more susceptible to fluctuations.

Adam Zdrodowski