The office stock in Central & Eastern Europe grew modestly during the first half of 2011, but development completions remained at the lowest level on record, according to the latest data from CB Richard Ellis (CBRE).

Despite a recent increase in development starts across CEE, relatively low levels of completions are expected over the next 12-18 months. 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 were 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.

As a result of limited new office supply and increasing demand, average vacancy rates in CEE (including Eastern Europe) declined below 14% following a 2% decline since Q4 2010. 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%.