Central and Eastern European commercial property market performance returned to positive territory in 2010, delivering a 3.1% euro-denominated total return, according to the IPD CEE Annual Property Index. This was a strong improvement on 2009’s -6.5% return.

However, key Central and Eastern European markets - the Czech Republic, Poland, Hungary and Slovakia - as well as a composite return for the rest of CEE still delivered capital depreciation, at -3.8% at the all property level. The region’s composite markets have all delivered three consecutive years of capital depreciation, losing a cumulative -20.5% from property values.

Capital decline was driven by a -1.3% decline in market rental values and continuing risk perception in valuations. Initial yields stabilized over 2010, at 7.6%, identical to the previous years. Overall, last year’s capital depreciation was significantly milder than 2009’s -12.5%, suggesting some attenuation in the pressures on market values. The headline positive total return, therefore, was driven by a continuing strong income return of 7.2%.