CENTRAL/EASTERN EUROPE - While Poland and the Czech Republic are showing signs of recovery, other CEE real estate markets are still suffering from a major investment withdrawal of assets over the last 12 months, according to Austria's Erste Group.

Property-related investments in the CEE region fell by 91% year-on-year to €567m in the first half of 2009.

This is a much greater decline than in Germany, where investments fell by more than 70% to €3.3bn in the first half of this year, and higher than in Austria, which reported only a 16% decline to €800m.

Erste suggested in its market update that July and August has seen a certain rebound as there was €458m in investment in CEE with the main investment focus on Prague and Warsaw.

However, rents in the region were still on the decline and down 2.9% quarter-on-quarter, with major drops in Moscow, Kiev and Warsaw., said Erste.

And these are the three cities which Jones Lang LaSalle expects to have reached their peak of rental decline.

Investors in companies within the region are being "punished" at present, said Erste Group, and many of the real estate companies with high CEE exposure are trading at around 40% of their NAV.

"Those companies with the most pronounced decline in net asset value were the ones with a high CEE exposure, like Austrian CA Immo International or Immoeast."

Erste said it expects the number of development projects in the region to decline in the wake of the crisis but projects which began before summer 2008 are likely to be finished this year and other frozen projects could be revived.

"We see current yield levels already incorporating some of the future yield declines and only limited space for further increase towards the year-end 2009", the Erste analysts noted.