IMMOEAST Annual Report 2006/07

38 IMMOEAST Annual Report 2006/07
Decline Decline in returns leads
to higher fair values for
IMMOEAST office objects objects
Reduction of 6.4 percentage
points in office space to 34.0%
Office sector remains dominant
The office sector continued its strong positive development during the 2006/07 financial year. In all
countries in which IMMOEAST is present, the returns on office properties declined steadily. That had
a favourable effect on the fair value of the property portfolio, but also reduced the realisable returns
on new investments. This change in the operating environment also led to a change in the pattern
of investments by IMMOEAST.
Returns in Central Europe continue to approach western levels
In the capital cities of Central and Eastern Europe (Prague, Warsaw, Budapest and Bratislava), the
top returns for fully occupied office properties in prime locations declined steadily to a level of
5.0% to 5.75% by the end of the financial year. This development significantly reduced the difference
to returns in major western cities, and forecasts are now indicating that returns will equalise
during 2007/08.
The office sector remained the largest area of business for IMMOEAST in 2006/07. As of 30 April
2007 this segment represented 34.0% of the portfolio (based on total letable space), which reflects
a decline of 6.4 percentage points in comparison with the previous year. In spite of this shift, the
share of office space still exceeds the steadily growing retail segment.
As a percentage of new investments, the share of office projects fell behind the retail segment to
equal only 29% in 2006/07. A total of EUR 1.4 billion was invested in office properties during the
reporting year, but the share of new investments in the retail sector fell to 39%.
Most of the investments made in office properties during the reporting year represented completed
objects, primarily with high occupancy rates between 80% and 100%. The new acquisitions include
the Mokotow Business Park in Warsaw with 136,000 sqm of letable space that is almost fully occupied
and three objects in the BB Centrum in Prague with a combined total of 73,000 sqm of fully
CZ, Prague, BB Centrum