EUROPE – European office real estate markets have suffered a sustained downswing which will continue in Western Europe until 2005, says the real estate investment arm of the Allianz Group.

Allianz’s DEGI has produced its first investment report on office real estate markets, which shows the European market to be in a sustained downswing phase as a result of low economic development. According to DEGI, even the upturn expected in 2004 will not be sufficient to generally increase sales of office space.

A further drop in rents is to be expected in most Western European locations in 2004, says DEGI, which is not predicting a recovery until the beginning of 2005 at the earliest.

However, says the research, the Central and Eastern European markets, have already bottomed out, since they show stable vacancies and rents that are only falling slightly.

DEGI divides Europe up into the sub-sections of Western Europe, Central and Eastern Europe and Scandinavia as the geographical regions are at different phases in the market cycle.

With regards to open-ended real estate funds, Paris has seen the most interest over the past year, says the report. “Greater interest has also been shown in Southern European countries, especially Spain and Italy, over the past few years, and also recently in Scandinavia and the countries of Central and Eastern Europe that are candidates for accession to the EU.”

As a sector, office real estate remains the main type of use, says DEGI, where investors are increasingly moving out to modern office sites in peripheral locations or surrounding areas.

DEGI holds assets of approximately 10.1 billion euros.