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Central and Eastern Europe real estate is performing well in terms of investment and Colliers International expects the region will absorb even greater volumes of capital this year as international investors travel further afield to deploy increased property allocations.

Commenting on Collier's new report, Opportunity Knocks for CEE, Damian Harrington, regional director of research, said: 'Institutional, private equity and sovereign wealth funds are growing and increasing allocations to property. The weight of this capital, alongside increasing debt availability and a new real estate development phase are helping extend the current investment cycle.'

CEE
In the CEE region, Poland and the Czech Republic continue to be very strong performers in terms of investment turnover but do not appear to be showing any signs of overheating from a yield pricing perspective. Neither do the markets of Hungary, Bulgaria, Romania and the Baltics where there was a significant rebound in investment activity during 2014. Russia has moved in the opposite direction.

In the report Colliers looks at the spread of yields over 10-year national government bonds. Even though some government bond rates have changed in response to the ECB's quantitative easing programme, the analysis provides insight into which markets offer a risk-premium.

All CEE markets, except Moscow, have a 3.0% spread above government bond rates. This indicates a positive spread between the potential cost of debt and the return on the asset. Even based on the 5-year bond rate, the CEE region looks good from a risk-adjusted yield perspective with Sofia, Prague, Bucharest and Warsaw featuring in the better positioned markets.

As the volume of distressed debt and asset sales diminishes across Europe, investors will need to consider other opportunities, says the report. Italian and Austrian banks, which hold a sustantial number of CEE loans, are also being targeted for sales in 2015.

'While the CEE region may be perceived as being riskier and the scale and quantum of opportunities available may not have always whetted the appetite of some global investors, we could see investors shift their intention to the CEE region as the market opportunity for both distressed sales and well-priced assets diminish across Western Europe, Harrington said.

'To some extent, you could say that prime yield pricing is an advantage for the CEE region, and the fundamentals supporting growth in occupational demand for both offices and industrial and logistics growth are stronger. It is a region with room for more capital,' he added.