Seven major European cities will continue to face high vacancy rates in office buildings over the next two years despite a more robust European market, a new study claims.

The study, compiled by German real estate fund provider Oppenheim Immobilien-KAG (OIK), said the high vacancy rates would persist in Frankfurt, Amsterdam, Milan, Stockholm, Warsaw, Luxembourg and Brussels.

However, the study stressed that the reasons varied according to the city. While vacancies in Frankfurt, Amsterdam and Milan would be driven by a weak local economy, as well as new buildings coming onstream, those in Warsaw, Luxembourg and Brussels would be solely a result of new building.

“Stockholm is a special case. A lot of new office buildings came on stream in 2000 and 2001, so the considerable vacancies persist,” said Stefan Wundrak, a researcher at OIK, adding that it had nothing to do with the Swedish economy, which was in relatively good shape.

Overall, the study found that the prospects for the European office space market were good as vacancy rates would fall between now and 2008.

It said the market would be further buoyed by strong demand for real estate among European and foreign investors, the latter including those from the US, the Middle East and Australia.

“Amid scarce supply (of real estate) at home, European investors are increasingly looking at opportunities elsewhere on the continent,” commented Siegfried Cofalka, managing director of OIK.

Separately, Germany’s LB Immo Invest has launched a new core real estate fund targeted at institutional investors.

The provider, owned by three German Landesbanken (state banks), said the fund would invest primarily in German commercial property, adding that it aimed to take in a few hundred million euros in assets “in the long term.” The fund’s only current investor is a German Landesbank.

LB Immo Invest noted that the timing of the fund was opportune, as the German real estate market was on the verge of a recovery. “The prospects are good because many objects can be acquired at attractive prices and rents are on the way up,” it said.