CEE - Total returns for central and eastern Europe (CEE) real estate dropped to 0.5% for 2008 from 14.2% for the previous 12 months, according to International Property Databank (IPD).
The best performing property sector was retail, posting a total return of 2.5%, while industrial suffered the most with a negative -4.4% performance, and offices generated a more modest return of 1.5%.
The average all-property total return for 2008 remained in positive territory largely because of a relatively stable average income return of 6.3%, constituting a 40 basis points reduction from 6.7% in the previous year.
Capital growth, however, dropped to -5.4% in 2008, down from 7.1% in 2007.
All-property yields rose by 60 basis points to 7.2% in 2008, from 6.6% during the previous 12 months.
"In 2008, we saw a sharp correction in total returns of the CEE index being primarily driven by negative capital growth across all sectors," said Nassos Manginas, director for Central & Eastern Europe at IPD.
"After three years of positive capital growth in the region and in conjunction with the overall deteriorating economic conditions, the CEE real estate region did not manage to escape the downward trend in capital values.
"The industrial and office sectors have been most affected by capital depreciation with the retail sector suffering less.
"Overall, compound capital growth over the last four years was positive, at 4.3%, while income return was at 6.9%."