Lack of financing to push vacancy down in CEE: CBRE

A reduced pipeline and lack of available financing is likely to result in lower office vacancy levels across Central & Eastern Europe (CEE), according to the latest research from global property adviser CBRE.

The office pipeline under construction has remained subdued across CEE and without significant pre-leases developers are struggling to secure financing. Warsaw is the exception to this trend, where several speculative projects have started during 2011.

Vacancy levels range from 6.7% in Warsaw up to 22% in Sofia and Belgrade. The most significant decline to vacancy during 2011 took place in Sofia (-350 basis points). Kiev (+410 bps) and Zagreb (+390 bps) are still trending the other way.

'Despite declining vacancy across CEE, the general consensus is that most markets are still somewhat imbalanced. Warsaw's office market seems to be rather solid, and - despite a growing pipeline under construction, appears able to keeping vacancy rather low. Solid demand and strong absorption are the backbone to this,' said Jos Tromp, head of CEE Research & Consultancy, CBRE.

The CBRE CEE weighted average prime office yield (including Eastern Europe) compressed further during the second half of 2011 to 8.7%. This is 65 bps lower when compared to the end of the fourth quarter of 2010 and is 12 bps down on Q2 2011. Compression was mainly driven by prime yield movement in Eastern Europe, while prime office yields remained mostly stable in Central Europe during H2 2011.