EUROPE - European pension funds are upping investment in Czech and Polish major cities as pricing levels off, according to CBRE - but even bolder investors are reluctant to invest outside the region's core markets.

Data published by the firm to the end of September show that investors had ploughed €8bn into the Czech Republic, Poland and Russia - double the figure for the same period last year.

The figures for Prague, which was the most active country in terms of investment volume in the third quarter, were somewhat skewed by recent large transactions.

Driving the increase has been a risk of inflation elsewhere and limited alternatives in other asset classes, according to CBRE CEE capital markets director Paddy O'Gorman.

He also pointed to CEE core markets' capacity for growth and the "opportunity or obstacle" presented by non-euro-denominated markets.

Excluding risk-hungry investors in Russia, the data reveal an increase in activity by Austrian pension fund investors and insurers, and by UK and US opportunistic investors forecasting income and capital growth over the next few years.

UK investors, in particular, have increased activity in the region by 80% compared with 2010.

"Poland and the Czech Republic don't have local investors in the market, so cross-border investors are competing with other funds with the same return criteria," said O'Gorman.

Meanwhile, regional activity outside the Czech Republic and Poland has been almost non-existent, though Europa Capital is currently negotiating a deal in Sofia.

O'Gorman said investors were also looking again at Hungary, with a couple of deals currently under offer.

"Romania is a bit more difficult, but it's a bigger market," he said. "Hungary, Bulgaria and Slovakia are small markets with population issues. How much bigger can the office markets in those countries get?"

A statement issued by CBRE suggested particular traction in prime office and prime retail, and sale-and-leaseback deals on logistics properties.