REAL ESTATE - European office will continue to perform overall in 2007, according to IVG’s recently published Real Estate Barometer.

IVG attributed the sub-sector’s "extraordinary" sales volume last year to falling yields as a result of strong demand for rental space. Analysis of 18 western European markets found a 16.6% increase in space turnover over 2005. Growth in Budapest, Prague and Warsaw was 16.1%.

Paris saw significant turnover in 2006, with an increase of just over 29%. The highest increase was in Stockholm (69%), Amsterdam (60%) and Prague (50%). In contrast, Rome saw a 30.7% decline.

IVG spokesman Peter Müller said he was optimistic for office despite higher-than-average office vacancy rates in Germany, especially Frankfurt (16.6%) and Düsseldorf (11.6%) against a European average of 7.15%. He added that the development of German markets compared with markets elsewhere in Europe had been delayed but that they would "close up" in the near future.

At 3.4%, Moscow – with data shown here for the first year – showed the lowest vacancy rate, although building activity is expected to ratchet up supply by 25% by the end of 2008.

As prime rents increased – notably in London and Paris – prime yields declined almost universally below 6%, compared with above-6% yields in 15 markets just three years ago.