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Average office vacancy rates in CEE declined below 14% in H1 2011 following on from a 2% decline since the fourth quarter last year, according to the latest data from CB Richard Ellis (CBRE).

The further decline in vacancy was a result of limited new office supply and increasing demand. The majority of this decrease was the result of positive vacancy trends in Eastern European capitals, as net absorption was particularly strong there.

Differences in vacancy rates remain significant across the region. Warsaw still has the lowest vacancy rate in the region - slightly above 6% - which has encouraged developers to launch new projects. Belgrade, on the other hand, is still struggling with a vacancy rate close to 24%.

CBRE said that office stock in the CEE region grew modestly during the first half of 2011, but development completions remain at the lowest level on record.

The property adviser said that relatively low levels of completions are expected over the next 12-18 months despite a recent increase in development starts across CEE. Weak occupational fundamentals coupled with continued challenges in securing financing mean that developers have been reluctant to launch new projects.

Although most lenders still require pre-lets in order to finance new developments, a number of speculative projects was registered again after having been absent from most markets in recent years. However, Moscow's pipeline has remained limited due to new planning regulations, while some markets in South Eastern Europe (SEE) are still facing a shortage of new office space due to projects being delayed.