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European real estate investment volumes in the second quarter rose 2.5% on the first three months of the year, driven by increased activity by foreign buyers (up nearly 16%), in core Western markets, according to the latest update from Cushman & Wakefield.

But at EUR 11.97 bn, volumes were nonetheless just 41% of the average for 2008 and only 19% of the average for the market's peak year in 2007.

Cushman & Wakefield said the stirring in activity has been accompanied by a more stable picture for yields, with the all-sector average for Europe rising just 7 basis points compared to 28 basis points in the opening quarter.

'The numbers on the market make for better reading than they did earlier this year', commented Charles Taylor, head of Investment and a partner in Cushman & Wakefield's Budapest office. 'Although there remains a fundamental mismatch between what many buyers want and what is available for them to buy, the allure of historically high income yields is tempting increasing numbers back into the market.'

Average prime yields across Europe now stand at 7.52%, with Western yields (excluding the UK) averaging 6.65% versus 6.97% in the UK, 8.63% in Central Europe and 12.86% in Eastern markets. The yield differential between west and east therefore stands at 621bp versus 423bp one year ago. Despite the opening of this yield differential, investor activity in Eastern markets remains very subdued.

Across the sectors, investors are still very much focussed on core Western markets with demand most evident in markets such as the UK which have seen the most extensive pricing corrections. This is not a universal trend however and is not yet evident in Spain and many of the Nordic markets for example, where, despite a greater than average shift in yields, increased interest over recent months has yet to translate into deals, as investors await evidence that pricing is set to stabilise.