The Class A office market in Central and Eastern Europe (CEE) registered an expected drop in average investment recovery rates, according to the most recent report issued by Colliers on the regional real estate market.
In the second half of 2006, Romanian office market performance fell below 7 percent. The average on the A Class office market was 7.10 percent, dropping by one fifth from 2005. Compression of investment performance in is expected in all sectors in 2007, to a level similar to that in EU member countries in the region, of six percent for all Class A office buildings.
There was also a downward trend on yield in on the A Class office market, of some 7.45 percent, down 0.45 percent from 2005, according to Michael Smithing, Managing Partner, Colliers International & . In , a constant demand for high quality space will be reflected in yields to drop below six percent in the most attractive areas, from about 6-6.75 percent at present. There is currently 450,000 square meters available in , but this will increase by 150,000 sqm in 2007, while by the end of 2008 such space is expected to surge by half, according to Smithing.
In , office space performance stands at some 5.5-6.25 percent. The only significant yield transaction (of 7.6 percent) was the sale of the five-star Sheraton Hotel. The vacancy rate for office space was very good, at 5.4 percent, and the market rapidly absorbed all the newly-created space.
