King Sturge European Office Report 2010

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European Office Property Markets 2010/11

UK
England • Scotland • Wales
THROUGHOUT EUROPE
including:
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Hungary • Ireland • Italy • Luxembourg • Netherlands • Poland • Romania
Russia • Serbia • Slovakia • Switzerland • Turkey
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King Sturge: European Office Property Markets 2010/11
Contents
Executive summary 2 What are the main European real estate

tax issues? 37
Europe-wide analysis 3
Courtesy of BDO LLP
City summaries 13 Austria 40
Belgium 41
Western Europe 14 Bulgaria 42
Austria Vienna 14 Croatia 43
Belgium Brussels 14 Cyprus 44
Cyprus Nicosia 15 Czech Republic 45
Denmark Copenhagen 15 Denmark 46
Finland Helsinki 16 Estonia 47
France Lyon 16 Finland 48
Marseille/Aix 17 France 49
Paris 17 Germany 50
Germany Berlin 18 Greece 51
Frankfurt 18 Hungary 52
Munich 19 Ireland 53
Greece Athens 19 Italy 54
Ireland Dublin 20 Latvia 55
Italy Milan 20 Lithuania 56
Luxembourg Luxembourg 21 Luxembourg 57
Netherlands Amsterdam 21 Netherlands 58
Norway Oslo 22 Norway 59
Spain Madrid 22 Poland 60
Sweden Stockholm 23 Romania 61
Switzerland Geneva 23 Russia 62
Zurich 24 Serbia 63
UK Belfast 24 Slovakia 64
Birmingham 25 Spain 65
Bristol 25 Sweden 66
Cardiff 26 Switzerland 67
Edinburgh 26 Turkey 68
Glasgow 27 UK 69
Leeds 27
London 28
Manchester 28
Newcastle 29
Thames Valley 29

Central, Eastern and Emerging Europe 30
Bulgaria Sofia 30
Croatia Zagreb 30
Czech Republic Prague 31
Estonia Tallinn 31
Hungary Budapest 32
Latvia Riga 32
Lithuania Vilnius 33
Poland Warsaw 33
Romania Bucharest 34
Russia Moscow 34
Serbia Belgrade 35
Slovakia Bratislava 35
Turkey Istanbul 36
1
Executive summary of a recovery in office development activity. This

situation is unlikely to change in the near future
Greek crisis highlights economic divisions with speculative funding remaining extremely
within Europe scarce.
• A north-south divide is emerging in the Eurozone • A combination of improving demand and limited
economy. Portugal, Ireland, Greece and Spain supply is expected to bring a more widespread
(PIGS) remain mired in recession into 2011 and decline in vacancy over the next year.
the core recovers at an unspectacular rate.
Rents close to their trough
• By contrast, outside of the single currency area,
• London and Paris have been the first western
the UK and the Nordics post stronger-than-
markets to see evidence of a prime rental upturn
average performance to lead growth in the west.
in early 2010 - most other centres have been flat.
• Central and Eastern European (CEE) economies
• In CEE, fortunes have been mixed, with Moscow
experience the most vigorous rebound longer
and Istanbul rebounding, but softer conditions
term, registering GDP rises of more than twice
prevailing in other centres.
the Eurozone average.
• Even in the most vulnerable cities, the outlook
Occupier demand set for slow recovery
is for stability over the rest of 2010, though the
• There have been tentative signs of a turnaround prospects for growth are expected to remain
in western office occupier demand, led by Central subdued.
London.
Investment recovery broadens
• In CEE, the recovery is not as well established,
• Since mid-2009, there has been a healthy revival
but activity is expected to move ahead by the
in European office investment activity, spreading
end of this year, driven by Warsaw and Moscow.
from west to east as confidence has improved.
• With economic uncertainty high, further recovery
• Prime office yields have moved sharply inwards
will be gradual, but prospects will be underpinned
in the west and are back to their long-term
by the resumption of office employment growth.
averages in some markets.
Supply stabilises in 2010
• In the east, prime yields moved outwards for
• Office vacancy rates have stabilised at high much of the last year, though there are signs that
levels over the last 12 months, with further they have now peaked.
deterioration in some centres counter-balanced
• The outlook is for continued recovery, albeit
by improvement in Moscow and London.
cautious, with occupier fundamentals expected
• Outside of Central London, there is no evidence to drive investment performance across Europe.
Prime office rents and yields 2010Q2
1,000 16%
€/m2/annum Prime yield %
800
12%
€/m2/annum
600
8%
400
4%
200
0 0%
London West End
Geneva
Paris
London City
Zurich
Moscow
Milan
Luxembourg
Frankfurt
Stockholm
Dublin
Istanbul
Oslo
Munich
Athens
Madrid
Manchester
Edinburgh
Thames Valley
Bristol
Birmingham
Leeds
Glasgow
Amsterdam
Helsinki
Warsaw
Vienna
Cardiff
Newcastle
Prague
Bucharest
Brussels
Marseille
Berlin
Lyon
Sofia
Budapest
Copenhagen
Nicosia
Riga
Zagreb
New Belgrade
Tallinn
Bratislava
Vilnius
Belfast
Source: King Sturge Q2 2010
2
Navigating uncertain waters All the PIGS are set for prolonged recession, with
only Ireland emerging strongly over the longer term.
Europe’s office markets and the Spain, one of the star performers in the 2000s and
economic recovery the Eurozone’s fourth largest economy, is expected
to experience three years of falling output.
Sovereign debt crisis highlights different
speeds of recovery across Europe Table 1: GDP forecast 2010-15
At the start of 2010, optimism about the Eurozone Annual % GDP
was growing. An upturn in world trade from mid- 2009 2010f 2011f 2012-15f
2009 had brought a return to growth, ending the Eurozone
worst recession since 1945. There were hopes Austria -3.4 1.2 1.6 2.1
that the legacy of the financial crisis would be less Belgium -3.0 1.4 2.0 2.3
of a drag than in other parts of the world, and that Cyprus -1.7 -0.3 1.8 3.3
the Continental economies would, for once, out- Finland -8.1 0.4 3.0 3.5
perform. France -2.5 1.2 1.7 2.1
Germany -4.9 1.8 1.8 2.1
The onset of the Greek debt crisis in the spring Greece -2.0 -4.3 -3.2 1.1
Ireland -7.1 -1.0 2.8 3.8
has brought a more sober assessment of growth
Italy -5.1 0.5 0.7 1.6
prospects. Greece’s financial problems reached a
Luxembourg -3.4 1.9 2.5 3.1
head in May 2010 and eventually forced a German-
Malta -1.5 2.3 2.1 3.0
led EU bail-out. But, this €110bn assistance package
Netherlands -4.0 1.2 2.0 2.4
has yet to narrow bond spreads in the exposed
Portugal -2.6 -1.1 -1.5 1.5
economies, indicating markets are unconvinced
Spain -3.6 -0.6 -0.2 1.7
that the problem has disappeared.
Slovakia -4.7 3.0 4.0 4.6
Slovenia -8.1 0.8 1.5 2.9
There are a number of reasons for the lingering
Eurozone -4.1 1.0 1.2 2.1
concern. The contagion threat from Greece to other
Other Western Europe
larger nations is the main worry, with Spain, Ireland,
Denmark -4.9 1.2 2.2 2.5
Italy and Portugal also struggling to meet their fiscal
Norway -1.5 0.7 2.3 2.4
targets. In addition, big EU banking exposures -
Sweden -4.7 0.8 2.8 2.4
notably in France and Germany - have raised the Switzerland -1.5 1.8 1.7 2.1
spectre of a second financial crisis if there were a UK -4.9 1.1 2.3 3.2
sovereign bond default. Many countries have also Central and Eastern Europe
responded to Greece’s problems by tightening their Bulgaria -5.0 -1.0 3.7 6.4
fiscal policy. This has brought an abrupt end to the Czech Republic -4.1 1.7 3.2 4.4
stimulus of the last year or more, and is expected to Estonia -14.1 0.5 3.6 5.2
dampen the recovery. Hungary -6.2 0.9 2.8 4.5
Latvia -18.0 -3.5 2.2 6.3
North-South divide in the Eurozone Lithuania -14.8 0.2 3.9 6.4
Better than expected Q2 data have eased the fears Poland 1.9 3.0 3.4 4.9
of a double-dip recession, but Eurozone growth Romania -6.9 -1.8 2.7 5.7
forecasts have generally moved downwards since EU-27 -4.2 0.9 1.6 2.4
the spring. The impact of these revisions has not Other CEE
been even across the single currency area, however, Russia -7.8 5.0 4.8 5.0
with a distinct north-south split emerging (table 1). Turkey -4.7 5.9 5.8 6.7
Croatia -5.8 -0.5 2.6 4.5
In the south, the so-called PIGS (Portugal, Ireland, Serbia -3.0 1.5 3.0 4.5
Source: Oxford Economics, Summer 2010
Greece and Spain) have been downgraded most
because they face the toughest fiscal challenges.
3
By contrast, the core Continental nations are conditions. This growth is expected to be sustained.
holding up better. Germany, France and the Benelux By contrast, Serbia and Croatia are recovering
countries are due to experience a steady recovery at a more lacklustre pace, with demand weighed
over the next two years. These economies should down by fiscal concerns and external volatility. EU
also see a return to job creation by next year. The convergence goals ensure a strong recovery from
laggard is Italy, where structural problems are more next year, but they will remain vulnerable in the
serious and GDP growth weaker, but its economy is short-term.
set to emerge from recession in 2010.
Employment drivers point to robust office
Overall, Eurozone GDP is forecast to grow by 1.0% demand
this year and 1.2% in 2011, with a return to trend Total employment is set to lag the recovery in GDP
growth of around 2.0% a year over the medium this year, but the worst impact has been outside
term. Employment continues to contract into of traditional office occupier sectors (chart 1).
2011, but hiring resumes thereafter. This is still a Office employment in the EU-27 fell last year as
solid performance, but less impressive than was the financial crisis hit hard and a further decline of
expected before Greece’s troubles flared up. -0.5% is expected this year1. But from 2011, office
hiring resumes and continues at a rate that exceeds
Outside the single currency area in the west, the most other sectors. As increases in headcount are
outlook is better. The UK has benefited from sterling associated with rising take-up, these projections
depreciation and recent decisive fiscal action. From indicate healthy fundamentals for occupier demand.
2011, both GDP and job growth out-strip those of
all its larger EU partners. The Nordic economies are Chart 1: Employment growth in EU27 – all sectors and
office jobs
also emerging from the recession more vigorously.
4
The prospect there is for annual growth of almost Forecast
3
2.5% over the next five years, well above the single
currency average. 2
annual % change
Eastern bloc emerges strongest 0
Emerging economies in Central and Eastern Europe -1
(CEE) saw some of the deepest contractions in -2
output last year, as manufacturing was decimated -3

2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
by the global slump. After a tentative start this year,
All sectors
however, these nations are set to see the strongest Office jobs
growth rates in the recovery, with GDP increases of Source: Oxford Economics
5% a year or more in prospect over the longer term.
This begs the question of which European office
Central Europe’s largest economy, Poland, was centres are likely to do best in future. An indication
the only EU nation to avoid recession in 2009 of this is provided by breaking down forecasts to
and sees a rapid return to health, along with the a regional level. Office activity is concentrated in
Czech Republic and Slovakia. The Baltic States, urban areas and because of this growth in almost
Romania and Bulgaria continue to struggle in 2010, all of Europe’s city centres exceeds the EU regional
but experience expansion rates far in excess of averages. Table 2 gives a ranking of forecasts for
western norms thereafter. Hungary manages to selected EU cities up to 2015.
post decent growth too, despite persistent budget
deficit problems. On these measures, the larger international centres
in the west perform well, in line with recent market
Elsewhere the picture is also healthy. On the fringes evidence. London is the second fastest growing
of Europe, Russia and Turkey have shown a strong 1
Office employment consists of financial and business
rebound in 2010 on the back of improving global services plus public administration jobs
4
city and by far the largest creator of office jobs. But in office take-up for three years in 2010 (chart 2)2.
Frankfurt, Paris, Amsterdam, Munich and Milan are The recovery is currently patchy, but with evidence
also set to expand at healthy rates, despite sluggish of improving sentiment. A majority of centres
national performance. Here the key is the global expect activity to revive over the rest of the year
reach of these markets, allowing them to rise above and overall take-up is projected to expand by 10%
an uncertain domestic outlook. on 2009.
In the east, structural change has meant that the There remain important differences between
rapid GDP growth has not always translated into western cities. The most significant increases in
office jobs. But this situation is changing. Bucharest demand are expected in the larger global centres,
is expected to see the highest growth of any notably Central London and Paris. These markets
major office centre over the next decade, albeit went into the downturn earliest and hardest as
from a very low base. This expansion is driven by the financial crisis hit. But as the recovery in world
exceptionally strong growth in the underdeveloped demand has gathered pace, led by emerging Asia,
business services sector. Budapest, Warsaw, Sofia they have also seen the quickest turnaround, with
and Prague will also see dynamic conditions. demand picking up in London from mid-2009.
Table 2: Office hotspots 2010-15 Elsewhere, the upturn is more gradual, but there
are signs of recovery in Stockholm, Copenhagen,
Office jobs Office job New office Lyon, Munich and Berlin. More surprising, some
in 2009/ growth jobs created
1,000s 2010-15 by 2015
cities in the beleaguered PIGS economies are
/%pa /1,000s expected to record growth, Dublin notably. By
Bucharest 251 6.5 109 contrast, the main laggards are Vienna, Amsterdam
London 1,249 2.6 212 and UK regional centres, which remain well behind
Helsinki 206 2.6 32 London’s upturn.
Frankfurt 268 2.4 37
Budapest 319 2.4 47 Chart 2: Western Europe
Growth in total office take-up index
Munich 344 2.2 46
140
Amsterdam 328 2.2 47
120
Warsaw 374 2.2 53
100
Index 2000 = 100
Sofia 246 2.1 35 Trend line

80
Prague 331 1.8 35
60
Paris 1,204 1.3 96
Milan 555 1.2 49 40
EU27 48,951 1.2 3,910 20
Source: Oxford Economics, July 2010, based on NUTS3 regions 0

1996 1998 2000 2002 2004 2006 2008 2010
Source: King Sturge
Slow office recovery led by global centres

Demand in CEE has followed a different profile to
Occupier markets have been struggling against
the west (chart 3)3. These developing office markets
a challenging economic background since 2008.
saw almost uninterrupted expansion in the decade
The slowdown in leasing activity accelerated last
before the credit crunch and remained resilient into
year, when a sharp drop in total take-up saw many
2008. But by last year, the global downturn led to an
centres at their lowest ebb since the early 1990s.
The initial signs for 2010 have been more promising,
however, and the outlook for the year as a whole is 2 Western centres are Amsterdam, Athens, Berlin, Birmingham,
Bristol, Brussels, Copenhagen, Dublin, Edinburgh, Frankfurt,
generally more positive across the continent. Geneva, Helsinki, Leeds, London City, London West End,
Luxembourg, Lyon, Madrid, Marseille/Aix, Milan, Munich,
Estimates from the King Sturge network in the Nicosia, Paris, Prague, Stockholm, Vienna, Zurich. 2010
figures are based on H1 data and an estimate for the rest of
major western European cities indicate the first rise the year.
5
even more abrupt slowdown than in the west, with the recovery in a challenging economic climate.
total take-up dropping by about a third. While this upturn is expected to remain cautious and
uneven with very different rates of improvement in
Recent indications from the CEE have been different cities, fundamentals remain supportive
more positive, but so far recovery is also more of continued expansion. With office employment
uneven than in the west. A dramatic rebound in expected to resume its expansion from next year,
Moscow’s volatile office market has been the most this should support underlying activity over the
encouraging feature, along with impressive take- medium to long term.
up in Warsaw. On the basis of the latest evidence,
renewed expansion is also projected for Bucharest Vacancy to stabilise in 2010
and Bratislava by the end of 2010. The supply situation has been different in the
current cycle. Office vacancy rates rose sharply in
But other CEE cities are expected to see take-up the downturn of 2008 and 2009, but are expected
dip further, including Prague and Budapest. This to flatten off this year. An unweighted average of
is partly because these markets saw a milder western European cities shows rates stabilising
correction last year and in both activity remains at just over 10.0% of stock, with CEE levels also
close to the historic average. Elsewhere, activity steady at around 16.0%.
is heavily dependant on re-negotiations and lease
extensions from existing tenants, with scant new Comparisons with previous recessions in Western
demand. Chart 3 shows an underlying rise in CEE Europe suggest that availability is flattening off
demand of only 1%, suggesting that these markets earlier this time. This largely reflects development
remain 6-12 months behind the recovery in the trends. Office construction was booming until the
west. onset of credit crunch in August 2007. But this
meant that the supply pipeline was abruptly cut
Chart 3: Central and Eastern Europe
Total office take-up index well before recession brought a collapse in demand
400 in late 2008. Construction activity and office
350 completions have since dwindled to low levels
300 across many European cities.
Index 2000 = 100
250
Trend line
200 Aside from a few isolated examples, notably the re-
150 activation of office schemes in the London market,
100
development activity remains at low levels and new
50
supply will be limited. European banks are stronger
0
1996a 1998a 2000a 2002a 2004a 2006a 2008a 2010a than a year ago, but finance for speculative projects
Source: King Sturge remains scarce. With bank balance sheets further
damaged by the Greek crisis, there is little prospect
An encouraging aspect of this upturn is that of a dramatic turnaround, leaving new development
European office take-up has been in line with reliant on build-to-suit schemes.
the economic upturn, rather than a year or two
behind as in the past. This in part reflects stronger There are wide disparities in city vacancy rates.
corporate sector balance sheets emerging from The highest western rates are in Dublin and
this recession, making it easier for companies to Birmingham, where more than a fifth of office
take advantage of the trough in rents and the wide space is unoccupied, though these are set to fall by
choice of office supply. end-2010. By contrast, vacancy is expected to rise
to 18.0% this year in Frankfurt, with Amsterdam
This has led to speculation about the durability of not far behind.
3 CEE centres are Belgrade, Bratislava, Bucharest, Budapest,

Other markets are now seeing supply tightening.
Moscow, Riga, Sofia, Tallinn, Vilnius, Warsaw, Zagreb. Note
this index figure excludes Moscow market. In Central London, both the City and the West End
6
Chart 4: European office vacancy rates
35%
2009
30%
2010
25%
20%
15%
10%
5%
0%
Sofia
Amsterdam
Athens
Belgrade
Berlin
Birmingham
Bratislava
Bristol
Brussels
Bucharest
Budapest
Cardiff
Copenhagen
Dublin
Edinburgh
Frankfurt
Geneva
Helsinki
Leeds
London City
London West End
Luxembourg
Lyon
Madrid
Marseille/Aix
Milan
Moscow
Munich
Newcastle
Nicosia
Paris
Prague
Riga
Stockholm
Tallinn
Thames Valley
Vienna
Vilnius
Warsaw
Zagreb
Zurich
Source: King Sturge
are expected to see a decline in availability this year, Rents close to a trough
with vacancy now close to the long-term average European prime office rents declined by 20% on
in both markets. Paris is also expecting a decline, average during 2009, reversing the gains of the
along with Lyon and Marseille. Vacancy rates in previous upturn in many markets. Falling demand
Switzerland, which remain the lowest in Europe by and rising availability during the recession bolstered
some margin, are also falling. the bargaining position of tenants throughout last
year, pushing rents down and incentives up. But
A flood of development activity in the mid-2000s there is now growing evidence that the bottom has
left supply looser in CEE centres, but again there been reached in many cities.
are big contrasts. After peaking at over 35% last
year, the recovery of office demand in Moscow By mid-2010, prospects for rents looked healthier
is expected push vacancy down to 15% in 2010. across Europe. In the west, the largest centres
Rates are also set to dip in Warsaw, which, along have seen early signs of recovery, with prime levels
with Zagreb, remains one of the few CEE cities to pushing ahead in Central London and Paris. There is
still enjoy single-digit rates. Elsewhere, the trend also more tentative evidence of improvement in the
has been upwards, albeit at a much slower rate Swiss and Nordic cites. Most other centres have
than a year ago. yet to register a rise, though only a few vulnerable
markets such as Dublin have continued to see
A combination of improving demand and limited downward pressure. Even in these, the prospects
new supply is expected to bring a more widespread are for prime rents to stabilise over the rest of 2010.
reduction in European office vacancy next year.
This downward movement comes earlier than CEE rents have also levelled out since the start of
in previous cycles, chiefly reflecting the unusual the year, though the picture is mixed. Prime rents
office development cycle and subdued speculative have increased in those centres where economic
activity.
7
Chart 5: European office rents
€1,000
€900
2009
€800
2010
€700
€600
€/m2
€500
€400
€300
€200
€100
€0
London West End
Geneva
Paris
Zurich
Moscow
Milan
Luxembourg
Frankfurt
Stockholm
Dublin
Istanbul
Oslo
Munich
Athens
Madrid
Manchester
Edinburgh
Thames Valley
Bristol
Birmingham
Leeds
Glasgow
Amsterdam
Helsinki
Warsaw
Vienna
Newcastle
Cardiff
Prague
Bucharest
Brussels
Marseille
Berlin
Lyon
Sofia
Budapest
Copenhagen
Nicosia
Zagreb
New Belgrade
Tallinn
Bratislava
Vilnius
Belfast
London City
Source: King Sturge
growth has rebounded, notably Istanbul and focussed on well-let offices with secure income in
Moscow, though levels remain far below their the core locations.
previous peeks. Elsewhere the correction has
continued, albeit at a much slower rate and, in line Chart 6: European office investment transactions and
yields
with the west, prospects are for a stabilisation over €45 8%
the rest of 2010. €40
€35
7%
After this year, aside from those lead markets €30
Billions
€25
where prime rents are already responding, the €20
outlook in most European cities is for a subdued €15 6%
upturn in prime rents. As noted, the recovery in €10
demand is expected to be relatively patchy across

€50
€0 5%
Europe. So with vacancy declining earlier, the most 07Q1 07Q2 07Q3 07Q4 08Q1 08Q2 08Q3 08Q4 09Q1 09Q2 09Q3 09Q4 10Q1 10Q2
likely upside for rents is from supply constraints, Volume Cap rate
Source: RCA
especially in cities where Grade A shortages re-
emerge after the long development pause. Underlying transactions volumes have increased
over the last year, though levels are still well
Investment upturns spreads across Europe below their previous highs (chart 6). UK office
The early signs of a recovery in investment markets market purchases led the upturn in 2009, but were
were visible a year ago, most obviously in Central increasingly supported by activity in the rest of
London. Since then, the recovery has gathered western Europe.
momentum on the back of revived sentiment and
attractive pricing, with yields starting at historic By early 2010, investors were becoming more
highs and returns on other assets low. Investor adventurous. CEE acquisitions also experienced
interest remains highly selective, however, a revival, albeit tentative. Despite the continued
8
Table 3: Major office investment transactions
Market Date Property Name m2 Price €m
London Nov-09 HSBC HQ 109,996 862
Berlin May-10 Sony Centre 132,496 570
Paris Feb-10 HSBC France HQ 33,165 400
Paris Nov-09 Velizy Campus 139,000 382
London Jul-10 Tower 42 30,100 366
Munich Mar-10 Siemens Campus 371,251 350
Milan Oct-09 Maciachini Business Centre 86,000 300
London Jun-10 Park House 28,799 295
London Nov-09 1 Finsbury Ave 44,592 259
Paris May-10 Capital 8 – Messine 18,000 240
London Dec-09 5 Churchill Place 29,171 227
Source: RCA
freeze on finance, larger deals have also been more

plentiful over the last 12 months (table 3).
As the market revived from mid-2009, office yields

peaked and then moved inward. This reversal
was initially rapid. But with levels close to their
historic average in many markets, the rate of yield
compression has slowed in 2010.
On average, prime office yields in the west were

down 50 basis points by mid-2010, with only Athens
bucking the downward trend in other cities. This
represents a significant unwinding of the 150 basis
points outward movement seen over the previous
two years.
After unprecedented compression in the boom

years, trends in CEE markets have been slightly
different. Yields were still slightly higher on average
in mid-2010 compared with a year earlier. Overall,
these markets have now seen over 350 basis points
of outward yield movement since 2007.
While there is no prospect of a return to the doldrums

of 2008-09 and recovery is expected to continue,
property investment markets face a number of
challenges. Sovereign debt jitters, scarcity of bank
finance and a relatively slow economic upturn
will not help investor sentiment. In addition, the
potential for further yield compression is limited,
particularly in some western centres. There will
also be the impact of rising market interest rates
to consider further out. As a result, the longer-
term outlook for property investment will depend
critically on stronger occupier markets and rental
growth.
9
Prime rents and

yields - mid-2010
€306 €344
5.75% 6.00%
Glasgow ● ● Edinburgh
€135
7.00%
Belfast ● UNITED KINGDOM
IRELAND ● Newcastle €257
€350 6.75%
Dublin ● 6.00%
● Leeds
€375 Manchester ●
7.00% €331
6.50%
€257 ● Birmingham
6.50% €331
Cardiff ● 6.00% €300
6.50%
Bristol ● NETHERLANDS
€337
Amsterdam ●
5.75%
London ●
City West End
€624 €885
Thames Valley Brussels ●
5.25% 4.75%
€250 BELGIUM
€343
6.25% 6.25%
LUXEMBOURG
Luxembourg ●
●
Paris ● €420
€700 6.00% Frankfurt
5.25% €390
5.25%
€620
4.25%
FRANCE €860 Zurich ●
4.25%
Geneva ● SWITZERLAND
Lyon ●
€230
6.35% Milan ●
€450
5.00%
Aix ●
Marseille ●
€250
€360 6.50%
5.75%
● Madrid
SPAIN
10
FINLAND Prime rent
Rents (€/m2/annum) quoted refer to headline rents in
high quality buildings situated in prime locations and are
NORWAY €285 assumed to be over 500m2
€362 5.90%
6.00% Helsinki ●
● Oslo €390 Prime yield
5.25%
Investment yield (in%) quoted refer to a valuation of
Stockholm ●
Tallinn ● office property let at full market value which is of the
best physical quality, in the prime location, and with the
SWEDEN €175
8.00% ESTONIA best tenant’s covenant and contemporary lease terms.
Generally, a benchmark with which to compare other
properties.
€204
15.00%
Riga ● LATVIA
● Moscow
DENMARK €600
12.00%
● Copenhagen
€208
LITHUANIA
5.00%
Vilnius ● RUSSIA
€150
8.50%
€246
5.50%
Berlin ● POLAND
€276
6.35%
● Warsaw
GERMANY
€252
7.00%
● Prague
CZECH REP.
€360
5.00% €174 SLOVAKIA
● Munich 7.25%
Vienna ●
● Bratislava
€265
AUSTRIA 5.50% ● Budapest
HUNGARY
€216
8.00%
Zagreb ● ROMANIA
€192 CROATIA
8.50%
● Belgrade €252
9.50%
€180
9.50% Bucharest ●
SERBIA
ITALY BULGARIA
● Sofia
€228
9.00%
● Istanbul
€369
7.75%
TURKEY
GREECE
Athens ●
€360
7.25%
€204
6.50% CYPRUS
Nicosia ●
11
12
European City
Summaries
AUSTRIA - Vienna BELGIUM - Brussels
Contact: Agency and Investment – Alfons Metzger Contact: Agency – Cédric van Zeeland
MRG Metzger Realitäten Beratungs und Investment: – Jean-Philip Vroninks
Bewertungsgesellschaft mbH, Gumpendorfer Strasse 72, 1060 King Sturge LLP, Bastion Tower, Place du Champ de Mars 5 box
Vienna (+ 43 1 59 7 50 60) 15 (8th floor), 1050 Brussels (+32 2 286 9182)
In-town Out-of-town In-town Out-of-town

Prime rent (€/m²/annum) 265 120 Prime rent (€/m2/annum) 250 165
Prime yield (%) 5.50 6.00 Prime yield (%) 6.25 6.75
Vienna has an estimated 10.5 million m2 of office stock. Occupier Brussels has an estimated 13.4 million m2 of office stock across
demand has been in steady decline since 2007 and is forecast its city centre and out-of-town markets, which increased in 2009
to reach its lowest point in this cycle in 2010, dropping to around due to the completion of developments started during the boom
200,000m². This would represent a reduction of around 9% from of 2007-2008. Last year, office demand declined to 413,500m²
the 2009 total, a smaller drop than in previous years. Despite from a total of 475,000m² in 2008. This was the most subdued
this low level of take-up, there are signs of recovery, such as annual take-up in Brussels for more than a decade and well
stabilising rents and vacancy rates, and an upturn in business below the five-year average.
sentiment. As a result, activity is expected to improve towards
the end of this year. In the first quarter of 2010, key deals included Activity remained weak in early 2010, with just over 150,000m²
Wohnen signing a new lease for 2,100m² at Guglasse 17-19 and of take-up estimated in the first half year. This year, the most
SOS Kinderdorf leasing 1,950m² at Brigittenauer Lände 50-54. important deal has been the pre-let to BNP Paribas Fortis at the
Boreal building (35,793m²) in the North Station district. There are
Availability of office accommodation in Vienna rose slowly from a number of other important transactions close to finalisation, so
5.0% to 5.9% in 2009. It has been stable in the first half of 2010 full-year take-up is expected to rise towards 400,000m², slightly
and is only forecast to edge up slightly by the end of the year, below last year’s final figure.
to reach 6.1%. Construction of new office space is forecast to
flatten out in 2010 at a level of around 190,000m². Availability has risen in the market downturn and was not helped
by the high level (370,000m²) of office completions last year.
In 2010, the office market is perceived to have reached the This has helped push the office vacancy rate from its low of
bottom of the rental cycle. Rents dropped 12% from mid-2009 9.0% in 2007 to current levels of around 13.0% of stock. With
to mid-2010, to reach their current level of €265/m²/annum. demand improving and development at a lower level this year,
Prime rents are expected to remain stable over the second half the expectation is that this rate has peaked and will ease back to
of the year. 12.0% by year-end.
Investment volumes for Vienna offices in Q1 2010 were up on Prime rents in-town peaked in 2007 at €295/m²/annum and
the same period a year ago. Domestic investors accounted for eased to the current level of €250/m²/annum last year, since
the majority of transactions, whilst German institutions were when they have remained unchanged. Rents are projected to be
also active. Prime yields have stabilised at a level of 5.50%. stable over the rest of this year
One of the largest transactions in the first half of 2010 was
the purchase of a 21,500m² building at Obere Donaustraße for Active office investors remain focused on core prime assets
€65m by Raffaisen. across all classes. Yields in the CBD are at 6.25% for fully-let
office buildings with a 3/6/9 year lease, an inward movement
of 25 basis points since 2009’s peak. For properties out-of-town
levels are slightly higher at an average 6.75%, but this is also a
reduction on last year. We expect local institutional investors to
remain active, focusing on prime product, and private investors
to search for individual investment opportunities. As a result,
yields are likely to move in further over the next 6 months.
Vienna prime rents and yields Brussels prime rents and yields
400 6.0 400 8
300 5.5 300
200 5.0 200 6
100 4.5 100
0 4.0 0 4
2006 2007 2008 2009 Q2 2010 2006 2007 2008 2009 Q2 2010
Prime rent (€/m2/annum) Prime yield (%) Prime rent (€/m2/annum) Prime yield (%)
14
CYPRUS - Nicosia DENMARK - Copenhagen
Contact: Agency and Investment – Michalis Pantazis Contact: Agency and Investment – Peter Winther
AMP Andreas Pantazis Ltd, Politia Business Centre, Alkeos 23, Sadolin & Albœk A/S, Nikolaj Plads 26, 1067 Copenhagen
Office 302, Egkomi 2404, 1642 Nicosia (+357 22 676 423) (+45 70 11 66 55)

Prime rent (€/m²/annum) 204 145 Prime rent (€/m²/annum) 208 120
Nicosia has an estimated 520,000m2 of office stock. Following Copenhagen has an estimated 11.2 million m2 of office stock.
a dramatic slowdown in 2009, recovery in the occupier market Following the global economic downturn, the office occupational
has yet to materialise. Take-up in 2010 is forecast to be in the market has contracted over the past two years. Total take-up in
region of 3,000m², which is 40% lower than last year and 70% 2009 fell to around 200,000m², a drop of 38% from the level
lower than in 2008. This is expected to represent the bottom achieved in 2008. The forecast for 2010, however, is more
of the cycle, which will be followed by a gradual recovery over positive, with take-up expected to reach 280,000m². The majority
the next few years. Following the recession, many companies of demand in the first half of 2010 has been for modern buildings
have been reluctant to relocate and it is widely anticipated that in good central and suburban locations. Activity is expected to
new government measures to bring the deficit under control will remain strong as many occupiers will try to secure leases at
undermine recovery and adversely affect investment. current low rents.
The supply of new high quality office space remains limited, with Supply of office accommodation in Copenhagen has been
the majority of available floor-plates between 250-350m². There steadily rising over the past few years. The vacancy rate was
is a constrained development pipeline scheduled for Nicosia around 6.8% at the end of 2009 and is forecast to rise to
this year, which will bring a further 5,000m² when completed. 10.0% by the end of 2010. It is expected that vacancy rates will
Although lower than the average of previous years, this does stabilise, because of higher demand and slower construction.
represent a significant increase when compared with the In 2010 only 50,000m2 of new construction is forecast, which
exceptionally low level of 2009. Weak demand has resulted in would represent a drop of around 80% from 2009.
ample availability of secondary office space. Consequently, the
vacancy rate is expected to increase from its present level of Prime rents are around €208/m²/annum and should remain
6.5% to 7.0% over the course of the year. stable over the next six months. Tenant incentives, which have
been substantial, should also become less generous.
Rental levels for both in-town and out-of-town office
accommodation declined last year, with prime rents in-town The number of investment transactions was low at the start of
down to €200/m²/annum. Prime rents have subsequently edged the year, but has picked up lately. Institutional appetite for well-
up to €204/m²/annum and are expected to remain stable over let office buildings in good locations has increased, driven by
the second half of 2010. low interest rates. Prime yields remain stable at 5.00%. Demand
for secondary properties is weaker, partly due to increased
There has been only limited investment market activity over the vacancy risks and partly because of lack of financing for more
past year. The most significant transaction was the purchase of a opportunistic investments. A number of major transactions are in
4,400m² office development by the Cyprus Telecommunications the pipeline, and prime activity is expected to surge, dominated
Authority Pension Fund for €19million. Current yields for town by domestic institutions, well-capitalized property companies
stock have remained unchanged from last year at 6.50% and and private investors.
are expected to stay at this level for the remainder of 2010. The
investment market appears to be on course for a protracted, but
sustainable, long term recovery.
Nicosia prime rents and yields Copenhagen prime rents and yields
300 10 300 8
200 200
8 6
100 100
0 6 0 4
2006 2007 2008 2009 Q2 2010 2006 2007 2008 2009 Q2 2010
15
FINLAND - Helsinki FRANCE - Lyon
Contact: Advice – Hannu Ridell Contact: Investment – Christophe Audoux

Newsec - Maakanta Oy, Mannerheiminaukio 1, 00101 Helsinki King Sturge SA, 36 rue Brunel, 75017 Paris
(+358 207 420 400) (+ 33 1 44 55 70 00)

Helsinki Metropolitan Area has an estimated 5.8 million m2 of Lyon had an estimated 4.95 million m2 of office stock in 2009. It
office stock. The demand for new floorspace remains weak. is a significant regional office market in France, with the centre
Many companies have reduced their overall requirements and divided into specialised business districts dominated by individual
sub-let existing space. Meanwhile, new tenants are taking longer sectors such as financial, technology, R&D and biotech. There
to make decisions due to the wide selection of availability and is also an increasing trend for occupiers preferring out-of-town
a desire to get the best possible deal from landlords. The office locations, because of the better environment and lower rents.
property market is expected to follow the same trend during the
second half of 2010. In 2009, take-up dipped to 164,000m², down a third on the
previous year. This year, the occupational market has been more
In the first half of 2010, vacancy continued to rise, even in the dynamic, with transactions in Confluence, Gerland and Part-Dieu
central business district. The vacancy rate at mid-1010 was (CBD). Larger deals (over 2,000m²), where demand slowed more
12.5%, up from 11.5% at the end of 2009, and is forecast to sharply last year, have accounted for a more significant slice of
increase to around 13.0% by end-2010. take-up in 2010, with an important proportion also in sales to
occupiers. In the year as a whole, office take-up is projected to
The development pipeline is now being restricted with projects rise to around 200,000m², not far from its long-term average.
either postponed or stopped. Weaker demand over the past two
years has meant that developers are hesitant to commit to new Vacancy rates climbed from a low of 4.7% to a historic high
space. This has helped to ease the imbalance between supply of 8.0% of stock last year, though much of this excess is in
and demand. The level of new construction has slowed in 2010, peripheral markets not the CBD. This trend has been reversed
with only 59,000m² expected to be delivered, a drop of 67% on in 2010, as firmer demand and limited new supply have taken
2009. vacancy back to 7.5% by mid-year. With new completions at
only 70% of last year’s level in 2010 and take-up improving, the
Rental levels have declined since 2008 and at mid-2010 were prospect is for a further decline in availability over the rest of
around €285/m²/annum, down from €296/m²/annum a year this year.
ago. They may be subject to further downward pressure over
H2 2010 due to rising availability. The market downturn has hit prime rents for city offices, which
declined from their high of €260/m²/annum a year ago to their
Office investment volumes in Helsinki decreased significantly in current €230/m²/annum. Out-of-town rents also dropped, albeit
2009 and have not yet recovered. Prime yields have declined less sharply, reaching €185/m²/annum by mid-2010. With an
over the past year to current levels of around 5.9%. There have improving market balance, headline rents are expected to
been only a few office transactions in the first half of 2010. The stabilise in the near future.
most significant was the purchase by Aberdeen Investors of
a 6,900m2 office building - Falcon Gentti, Vaisalantie 8, Espoo Investment demand is stronger than a year ago, with prime well-
for €22million. There is still demand for high quality prime secured assets favoured by investors. At the moment, foreign
offices, but there are few such properties currently available. buyers have deserted this regional market, though Lyon is still
It is expected that the investment market will remain slow France’s second best performer after Paris. Prime yields have
throughout 2010, though interest is improving and international fallen by around 100 basis points over the last year, but are likely
investors are expected to return in the latter part of the year. to stabilise for the rest of 2010. Lyon is expected to remain a key
regional market, with investor interest concentrated on prime
commercial assets.
Helsinki prime rents and yields Lyon prime rents and yields
400 8 300 10
200
200 5 7
100
0 2 0 4
2006 2007 2008 2009 Q2 2010 2006 2007 2008 2009 Q2 2010
16
FRANCE - Marseille/Aix FRANCE - Paris
Contact: Agency & Investment – Jean Cabrera Contact: Agency – Nicolas JeanJacques
King Sturge Méditerranée SA, 14 rue Louis Astouin, 13002 Investment – Philippe Semidei
Marseille (+33 4 88 66 30 30) King Sturge SA, 36 rue Brunel, 75017 Paris (+ 33 1 44 55 70 00)

Marseille and Aix-en-Provence together had an estimated 2.8 In 2009, Ile de France had an estimated 51.2 million m2 of
million m2 of office stock last year. There are many development commercial office stock, one of the largest markets in Europe.
Paris and the inner suburbs – including La Défense, the Western
projects planned for the near future, especially in Marseille city, Business District and peripheral markets bordering Paris like
though these will not be progressed until the economic upturn Saint-Denis, Montreuil or Montrouge - account for over 70%
becomes more secure. As a result, the office stock is expected of this. Most French companies remain headquartered in Paris,
to remain broadly unchanged in 2010. despite increasing cost competition from other locations.
Take-up slowed to 1.8 million m² during 2009, which was the

The market saw demand improve in early 2010, when compared lowest annual out-turn in five years. In early 2010, activity has
with the lows of 12 months ago. Most of the recent transactions slightly increased, mostly for small and medium sized floor-
have been in the Euroméditerranée district of Marseille and in plates. There remains interest in new stock in peripheral and
Aix-en-Provence. The upturn is forecast to be sustained for the secondary markets with cost effective rents. But established
whole of this year, with take-up estimated at 110,000m2, slightly office districts are also picking up, following a steep rental
correction. In 2010 as a whole, take-up is forecast to edge up to
higher than last year’s out-turn. This level of activity is below the 1.9 million m², just shy of the long-term average (2 million m²)
peaks of the mid-2000s, but in line with historic market averages. and in line with a sluggish economic recovery.
Supply has remained relatively scarce, despite the economic There has been an increase in office availability across Paris. The
downturn. Marseilles / Aix vacancy reached a new high of 7.0% vacancy rate fell to a low of less than 5.0% only two years ago.
But by 2010 H1 it had climbed to 7.0%, as high as at any time
last year, but reversed in early 2010. By year’s end, a vacancy since the late 1990s. With demand recovering and speculative
rate of 6.5% is projected, assisted by lower levels of office development on hold, however, the prospect is for a reversal in
completions and stronger demand than in 2009. This trend has this trend before this year’s end, when vacancy dips to 6.7%.
supported prime market rents, which have edged higher over Moreover, with scant development pipeline, this rate will fall
the last 12 months, reaching €250/m²/annum, though tenant quickly as the market returns to normal and there is a risk of
space shortages re-appearing from 2012.
incentives remain generous.
There have been early signs of a recovery in prime rents this
The first half of 2010 saw limited investment activity in the year. City rents declined by about a fifth in the downturn, though
Marseille region. French investors continue to seek well-let levels held at €650/m²/annum after mid-2009. These rents
office properties in the established districts, which has brought recorded their first rise for two years during Q2 2010, with the
prospect of further improvement by year’s end both in and out-
about a further decrease in prime office yields (down 75 basis of-town. The current imbalance between demand and supply still
points on a year ago). Conditions are not expected to change favours occupiers, however, and is reflected in long negotiation
radically over the rest of 2010, however, with yields set to periods and generous incentives.
stabilise at their current levels.
Investment markets rebounded from Q4 2009, with prime
office property seeing a surge in interest. The average size of
transaction has also grown, as the financing of large acquisitions
has become easier. Yields have decreased by around 100 basis
points over recent quarters for well-let and liquid prime assets.
But investors continue to be extremely selective and the yield
spread remains large.
The investment outlook remains cautious. Volumes are likely to

increase slightly on 2009, though the progression is expected
to be moderate. Prime yields are set to fall moderately before
flattening out later this year, while secondary markets will
continue to lag.
Marseille/Aix prime rents and yields Paris prime rents and yields
300 9 900 9
200 600 6
100 300 3
0 3 0 0
2006 2007 2008 2009 Q2 2010 2006 2007 2008 2009 Q2 2010
17
GERMANY - Berlin GERMANY - Frankfurt
Contact: Investment – Sascha Hettrich Contact: Investment – Sebastian Ott

King Sturge Hettrich GmbH, Jaegerstrasse 34-35, D-10117 King Sturge GmbH, Kaiserstrasse 6, 60311, Frankfurt am Main
Berlin (+49 30 23322 211) (+49 69 2165 9870)
In-town In-town
Prime rent (€/m²/annum) 246 Prime rent (€/m²/annum) 390
Prime yield (%) 5.50 Prime yield (%) 5.25
Berlin has an estimated 18.3 million m2 of office stock. Frankfurt has an estimated 10 million m2 of office stock. As
Germany’s main financial centre, the city suffered badly from
The office market is not experiencing a rapid recovery in the its exposure to the global banking sector last year. But there has
wake of the global economic crisis. However, some encouraging been a stabilisation since mid-2009 and local economic indicators
signs are emerging. Take-up volumes declined to 444,000m² in have improved. Nonetheless, activity in the city’s occupier
2009. But, after a strong start, take-up for this year as a whole is market slowed to a five-year low of 335,000m² last year, well
forecast to rise to 500,000m². One of the most significant deals below the historic average of 550,000m². Office demand was
of Q1 2010 was the letting of around 14,000m² in the City East maintained in early 2010, but, even with a more vigorous H2
sub-market to the telecommunication company Nokia. in prospect, take-up is expected to be flat at 330,000m² for the
year as a whole.
The development pipeline should see an estimated 125,000m²-
150,000m² of new product delivered to the market this year. As After a sustained decline from the mid-2000s, office vacancy
a result, the vacancy rate, which has been broadly stable since has risen steadily over the last 2 years, reaching a rate of
last year, is forecast to edge up to around 8.4% by the end of 17.0% last year. The development pipeline is expected to bring
2010. around 200,000m² of new space to the market in 2010, with
the continued impact of corporate failures and consolidation
Stable supply levels and increasing demand have led to a levelling potentially adding further to supply. With demand subdued, a
off of rents. Prime rents in the city declined from €276/m²/ further rise in vacancy is in prospect in 2010 to 17.0%.
annum (€23.0/m²/month) in 2008 to €252/m²/annum (€21.0/m²/
month) by the end of 2009. They were around €246/m²/annum With the market balance continuing to favour occupiers, there
(€20.5/m²/month) in H1 2010 and are expected to stabilise over has been continued pressure on rents. Prime office rents peaked
the rest of the year. at €438/m2/annum (€36.5/m2/month) in 2008, but fell sharply
to €390/m²/annum (€32.5/m²/month) early last year. Since
Investor sentiment has significantly improved in the first half then, top rents have held up, though incentives have become
of 2010, as have transactions, boosted by a couple of large more generous and secondary prices continue to fall. Rents are
portfolio deals. Expectations for the coming months are positive expected to stabilise at around this level for the rest of this year.
and the investment market should continue this upward course
in H2 2010. The largest transaction in H1 2010 was the sale Sentiment in the Frankfurt investment market has significantly
of The Sony Center in Berlin to a Korean pension scheme for improved in recent months and activity has been revived. The
€572million. Prime yields have remained stable on last year at sales of Park Tower (for around €130 million) and the Westpol
5.50%, but may be subject to downward pressure over the next building have been important signs of revival. Financing remains
12 months. difficult, but the outlook is for further improvement in the rest
of 2010. Prime yields shifted out to 5.50% in Frankfurt last year,
though this was a modest movement compared with other
European markets. Since then there has been a slight inward
shift to 5.25%, with the prospect of further compression as the
year continues.
Berlin prime rents and yields Frankfurt prime rents and yields
300 6 700 8
225 525
150 4 350 6
75 175
0 2 0 4
2006 2007 2008 2009 Q2 2010 2006 2007 2008 2009 Q2 2010
18
GERMANY - Munich GREECE - Athens
Contact: Investment – Sascha Hettrich Contact: Agency and Investment – Thomas Ziogas
King Sturge Hettrich GmbH, Jaegerstrasse 34-35, D-10117 King Hellas, 7 Evinou str, Athens Tower Building C, Athens 115
Berlin (+49 30 23322 211) 27 (+ 30 210 7711 204)
In-town In-town Out-of-town

Prime rent (€/m²/annum) 342 Prime rent (€/m²/annum) 360 228
Prime yield (%) 5.00 Prime yield (%) 7.25 7.75
Munich has an estimated 13.3 million m2 of offices in its city 2010 is set to be another difficult year for the office property
centre market. Last year, there was a marked deceleration in market in Athens. The shrinking economy has led to a slump in
demand, with take-up declining to 375,000m² following six years demand. Office take-up at the end of 2009 fell to 40,000m², the
of average increases in excess of 550,000m². Occupiers remain second consecutive year of decline and 36% below the five year
very cautious. But activity was more encouraging at the start average. Demand will persist at low levels in 2010, with take-up
of 2010. The expectation is that take-up will rise to 425,000m² forecast at just 30,000m², which would represent a fall of 25%
in the year as a whole, still below the historic trend, but above on the 2009 level.
2009 levels.
Supply of new and existing buildings has increased. The rise
Supply has risen sharply in the downturn. The vacancy rate, consists mainly of secondary buildings, with the level of new
which had hit a low of 7.0% in 2007, rose to 8.7% last year. New construction falling. Many companies are downsizing and putting
completions of office space were relatively modest last year, but plans to move on hold. As a result, the vacancy rate is expected
a further 250,000m² is planned for delivery during 2010. As a to rise from 5.0% at the end of 2009 to 6.0% by the end of 2010.
result, the improvement in demand is not enough to prevent the
vacancy rate climbing to around 9.5% this year. Rents in secondary buildings have been in decline, although
prime rents have held stable over the past year and at mid-
With supply rising and demand subdued, rents are expected 2010 were €360/m²/annum. Rents are expected to come under
to remain under pressure in Munich. Prime office rents fell to further pressure over the next year due to weaker demand and
€360/m²/annum (€30/m²/month) in 2009, a four-year low, and rising supply. Occupiers have been able to press landlords for
had declined a further 5% by mid-2010 to €342/m²/annum rent reductions and incentives are expected to play an important
(€28.5/m²/month). role in the year ahead.
The investment market in Germany has seen a rebound in early The investment market has been quiet over the past year, with
2010, with some large transactions and renewed international the majority of transactions involving small offices taken by
interest. Munich has seen a few deals, including the Eisbach domestic purchasers. There remains a shortfall of quality office
Offices sold for €33 million to German fund manager KGAL in product on the market. Prime investment yields have moved out
Q2 2010. Expectations are for continued transactional activity by 75 basis points since mid-2009 and further increases are in
over the coming months. Prime yields for in-town offices saw prospect
an outward shift of 75 basis points to 5.50% between mid-2008
and mid-2009. Since then yields have moved in by 50 basis
points to 5.00% and this level is expected to be maintained over
the rest of 2010.
Munich prime rents and yields Athens prime rents and yields
500 8 600 8
400
250 5 6
200
0 2 0 4
2006 2007 2008 2009 Q2 2010 2006 2007 2008 2009 Q2 2010
19
IRELAND - Dublin ITALY - Milan
Contact: Agency – Declan O’Reilly Contact: Agency and Investment – Inara Jucinska / Giorgio
Investment – Adrian Trueick Lazzaro
HT Meagher O’Reilly Ltd, 20-21 Upper Pembroke Street, Dublin Gabetti Property Solutions Agency S.p.A, Via Bernardo Quaranta,
2 (+353 1 634 2466) 40 20139 Milan (+39 02.77.55.243)

Dublin has an estimated 3.25 million m2 of office stock. Last year Milan has an estimated 11.7 million m2 of office stock. Office
was one of the worst on record for activity in the Dublin office occupier demand was fairly muted in 2009, with total take-up
market, with occupier take-up slumping to around 75,000m², the of around 190,000m². However there are encouraging signs
lowest level since 1994. of a recovery in the market in 2010, with around 220,000m² of
take-up forecast for the year as a whole which would represent
There has been a revival during the first half of 2010, as a result an increase of 16%. Demand is predominantly for new and
of increased business confidence and activity from overseas centrally-located office space between 400 and 500m², with
occupiers. Office take-up for 2010 is forecast at around most occupiers preferring to lease rather than purchase. There
100,000m², which would represent an increase of 33% on is very little take-up of older offices in peripheral locations.
last year. Many occupiers are looking to take advantage of the
favourable rental deals that are currently available. Activity tends Availability in the Milan office market increased significantly in
to be focussed on the prime districts of Dublin 2 and 4. 2009, as a result of increased levels of vacancy and delivery
of around 220,000m² of new office space. Many occupiers
Following the steep drop in occupier demand last year, around a have started to reduce employee numbers and space, while
fifth of all office space in Dublin is now vacant. The development renegotiating more favourable terms on leases. The vacancy rate
pipeline, which has been in decline since 2008, is forecast to at mid-2010 was 9.4%. It is expected to remain stable at this level
halve again in 2010 to around 50,000m². This reduction, combined for the rest of 2010 owing to a slowdown of development, an
with increased occupier demand, should result in a stabilisation upturn in demand and changes of use from office to residential.
of the office vacancy rate at 21.0% for the remainder of 2010.
Prime in-town rents were around €450/m²/annum at the end of
Prime rents for premium-quality, in-town office accommodation H1 2010 and are expected to remain stable for the rest of the
fell to €375/m²/annum by the end of H1 2010, and are expected year. However, rents for sub-standard space are likely to come
to remain at this level for the second half of the year. Out-of- under increasing pressure.
town rents declined to €215/m²/annum by mid 2010 and are
also expected to hold steady for the remainder of the year. Office investment activity in early 2010 was better than the
same period a year ago, although not quite as high as in Q4
The investment market remained subdued over the first half of 2009. There were several transactions of small-medium size,
2010, with restricted availability of good quality stock. Despite spread across the city. The most active players were domestic
the lack of product, the number of overseas investors actively funds accounting for approximately 70% of total investments.
investigating the market has increased, with a number of Over the next six months a similar level of activity is expected,
European funds in discussions with Irish developers and their with domestic investors (funds in particular) disposing of and
banks to secure off-market transactions. acquiring important investment opportunities.
Investment turnover is likely to increase in the second half of the

year, with both Irish and international banks likely to encourage
borrowers to offload their income-producing assets to reduce
borrowings. Prime yields for long term secure income are
likely to strengthen, with a number of buyers actively looking
for suitable product. Yields for short term income and heavily
over-rented buildings will, however, continue to struggle as
confidence in the letting market remains fragile.
Dublin prime rents and yields Milan prime rents and yields
800 8 600 8
600
6 400
400 6
4 200
200
0 2 0 4
2006 2007 2008 2009 Q2 2010 2006 2007 2008 2009 Q2 2010
20
LUXEMBOURG - NETHERLANDS -
Luxembourg Amsterdam
Contact: Agency and Investment – Michael Chidiac Contact: Agency and Investment – ing Merijn F. Hartog
RealCorp Luxembourg SA, 22 Avenue Monterey, L-2163 DRS Makelaars, Amsteldijk 194, 1079 Amsterdam
Luxembourg (+352 26 27 29) (+ 31 20 640 5252)

Luxembourg has an estimated 3.05 million m2 of office stock. Amsterdam has an estimated 7.0 million m² of office stock. The
Office occupier take-up underwent a significant reduction in Dutch economy shrank by 4% over 2009 and this had a strong
2009, only reaching 110,000m², a 57% decrease from 2008. Take- impact on both the occupier and investment markets. Annual
up in the first six months of 2010 amounted to approximately take-up dropped sharply over the year to 192,000m², well below
50,000m². This reflects a slight rebound in the market, with Q1 the five year average of 327,000m².
take-up at 20,000m² and Q2 take-up at 30,000m².
Following the recession, occupiers remain cautious. There have
Supply has trended upwards and is now at a new high. The been increased levels of lease renewals, as existing occupiers
vacancy rate at mid-2010 rose to 8.0% and this is forecast postpone re-location to save costs, whilst new tenants are taking
to increase again, to around 8.2% by the end of 2010. The advantage of increased incentives and lower rents. Overall,
development pipeline remained at a reasonable level in 2009, occupier activity is forecast to slow to around 180,000m² during
with around 140,000m² of new stock delivered to the market, 2010.
the majority of which was speculative. This represented only a
small drop on the previous year and an additional 125,000m² is The availability of office space in Amsterdam is increasing due
forecast to come online by the end of 2010. to a rising level of tenant-released space. As a consequence,
the vacancy rate has increased from 9.0% at the end of 2008 to
Rents for prime locations have held stable at €420/m²/annum. 16.5% at the end of 2009. It is forecast to rise further, to around
However, due to the pattern of rising supply and falling take-up, 17.0% by the end of 2010.
it is expected that there may still be some downward pressure
over the next six months. Prime rents have remained stable at €300/m²/annum for over
a year, but remain under pressure as a result of increased
A drop in demand combined with a lack of suitable investment incentives and high levels of supply. The outlook is for continued
product has meant that investment in the Luxembourg office stability over the rest of the year.
market has been weak over the past year. The largest office
transaction of 2009 was the acquisition of 12,000m² of office Low investment volumes have been recorded over the first half
space at Plateau du Kirchberg by Befimmo SCA for €85 million. of 2010, although there is evidence of improvement compared
There have been no significant office transactions in the first with the same period a year ago. However, the majority of
half of 2010. The market has not been able to offer the product transactions were small and dominated by private investors.
of other European cities and is suffering from a lack of buyers. Foreign investment volumes were constrained, as buyers
German open-ended funds, which used to account for around sought mainly long-leased properties in prime locations, which
80% of all investments, have not yet returned. have been in short supply. Key investment deals included the
purchase of Het Parc by Hannover Leasing for €19million, the
purchase of Lauriergracht 49 by Domus Magnus for €12million
and the purchase of Herengracht 440-442 for €4.2million by
Lloyds ACS Beheer.
Luxembourg prime rents and yields Amsterdam prime rents and yields
500 8 400 8
250 6 200 6
0 4 0 4
2006 2007 2008 2009 Q2 2010 2006 2007 2008 2009 Q2 2010
21
NORWAY - Oslo SPAIN - Madrid
Contact: Agency and Investment – Nils Arne Gundersen Contacts: Agency & Investment – Emma Jackson
Newsec AS, Kronprinsens gate 3, PO Box 1800 Vika, 0123 Oslo King Sturge LLP, 30 Warwick Street, London, W1B 5NH
(+47 23 00 31 00) (+44 207 087 5518)
In-town In-town
Prime rent (€/m²/annum) 362 Prime rent (€/m²/annum) 360
Prime yield (%) 6.00 Prime yield (%) 5.75
The Norwegian economy is facing a weak and slow recovery in Madrid has an estimated 11.8 million m2 of office stock.
2010. The office real estate sector in Oslo is following a similar Occupier demand in the Madrid office market was extremely
pattern and is showing sporadic signs of recovery. Occupier weak during 2009, falling back to 300,000m². This represented a
demand in 2009 remained subdued, but has been slowly 40% decrease from 2008 and the lowest level seen since 1995.
improving since. Recently deals include: Aker Solutions taking a The slowdown in demand reflected increasing occupier caution
new 22,400m² building to be completed in 2012 and Deloitte AS in the face of prolonged recession and demand is set to remain
who will move into a new 15,000m² building in 2013. subdued.
Vacancy in the office market rose sharply last year. This increase On the supply side, office availability continued to rise, as
was caused by the weak level of demand and the delivery of companies moved to more affordable locations or reduced
140,000m² of new office stock. Tenants have subsequently had occupational space to save costs. A spike in supply was
a wider choice of office premises and are taking longer to sign recorded in Q1 2010, when around 80,000m² of new speculative
leases. Higher levels of occupier activity are expected during the offices were delivered to the market. These projects had already
second half of 2010, partly because most rental contracts are commenced before the worst of the economic and financial
renewed at year-end. difficulties took hold. But the overall forecast for new supply in
2010 as a whole is below the long term average. Many projects
Prime rents in the central business district fell significantly in remain on hold due to the high availability rate and weak demand.
2009, but have now stabilised at €362/m²/annum. Over the New developments are now only possible after a significant
next six months rents may be subject to upward pressure, as amount of the space has been pre-let.
occupiers use weak market conditions and higher levels of
availability to upgrade their space. The increased quantity of available space has continued to push
rents downwards. Prime rents stood at €360/m²/annum in mid-
Investment activity in Oslo was positive in early 2010 and well 2010, compared with €408/m²/annum one year ago.
up on the previous year. The second quarter was slower, but it
is widely expected that the market will continue to recover over Investment volumes in the Madrid office market declined
H2 2010. The majority of demand remains from local investors. substantially in 2009. This reflected both a lack of liquidity and
However, international investors continue to buy in Norway as low availability of quality product. Aggressive domestic bidders
evidenced by the largest transaction in H1 2010, a sale to NIAM. also forced foreign investors completely out of the running.
Lending opportunities have improved gradually and prime office Yields for properties in the CBD were generally lower than
investment yields have moved inwards by 50 basis points over required by foreign buyers. There has been evidence of prime
the past 12 months, to stand at 6.00% in mid-2010. yield compression, with rates down to 5.75% by Q2 2010.
Oslo prime rents and yields Madrid prime rents and yields
500 8 600 8
400 6
250 6
200 4
0 4 0 2
2006 2007 2008 2009 Q2 2010* 2006 2007 2008 2009 Q2 2010
22
SWEDEN - Stockholm SWITZERLAND - Geneva
Contact: Agency and Investment – Marie Bucht Contact: Agency and Investment – Robert Mathieson
Newsec Advice, PO Box 7795, Regeringsgatan 65, SE-103 96 Key Real Estate Consultants, 8 Chemin de Blandonnet, 1214
Stockholm (+ 46 8 454 40 00) Geneva (+ 41 22 545 51 00)

Stockholm has an estimated 11.9 million m2 of office stock. In Geneva has an estimated 4.38 million m2 of office stock.
H1 2010 there was a small, but encouraging increase in activity Occupier demand in the first half of 2010 improved slightly on
on the office leasing market. But, over the year ahead, take-up the same period a year ago. Total take-up for 2010 is forecast
is not forecast to rise dramatically, as many companies remain at 85,000m², which would represent an upturn of around 13%
cautious and cost-sensitive. from 2009 levels.
Supply has steadily increased in the Stockholm market. Between Market activity began to improve in 2009 with enquiries from
2008 and 2009 the vacancy rate rose from 9.5% to 11.5% and it a broad range of tenants, many of which were converted into
is forecast to rise to 12.5% by the end of 2010. The delivery of leases in 2010. Interest from finance companies for prime city
new office space in 2010 is forecast at around 160,000m², which centre space has been strong, either for expansion or new
is more than double the 2009 level. The increase in new office offices. Demand in the airport area has been noted from both
stock, combined with relatively weak occupier demand, are the financial companies (for high quality back office facilities) and
key factors driving the vacancy rate up in 2010. industrial companies looking for modern accommodation. The
increasing pressure on housing, health and other services in the
The Stockholm service sector started to stabilise from early city is also pushing businesses to other locations in the Lake
2010 and prime office rents are expected to remain fairly Geneva region.
static at around €390/m²/annum. However, tenants are still
concentrating on increasing the efficiency of their premises. In addition to the upturn in demand, the development pipeline
There is increasing differentiation between modern / efficient for new offices is expected to be much stronger in 2010, with
premises and older offices. an estimated 75,900m² to be delivered to the market. This
construction marks a significant upturn on the past two years.
Liquidity in the Swedish investment market has increased since Until this space comes on-line, the volume of good quality
mid-2009, with high quality properties in good locations most in accommodation will be constrained, which is expected to
demand. Stabilising rents and lower interest rates are the major increase pre-letting, as tenants are forced to plan ahead.
factors behind the recovery. A further inward yield movement is
expected in prime locations with strong investor interest during The increase in tenant demand expected over second half of
2010. The largest office transaction in the first half of 2010 was the year will result in a vacancy rate of around 4.0% by the end
the purchase of 40,000m² of space at Frosundavik Business Park of 2010, well down from the end of 2009. Competition from
for around €113 million by KLP Fastigheter AB developments in the area between Geneva and Lausanne will
continue to be sufficient to keep rents generally stable.
The investment market has continued to be slow, with a low

level of both number of transactions and their average size.
In general, lack of stock coming onto the market and the gap
between buyer and seller expectations have been the major
constraints. Notwithstanding this, investor interest is strong,
with international buyers returning and more transactions
anticipated over the rest of the year.
Stockholm prime rents and yields Geneva prime rents and yields
600 8 1,400 6
300 5 700 5
0 2 0 4
2006 2007 2008 2009 Q2 2010 2006 2007 2008 2009 Q2 2010
23
SWITZERLAND - Zurich UNITED KINGDOM -
Belfast
Contact: Agency and Investment – Robert Mathieson Contact: Agency and Investment – Rory McConnell
Key Real Estate Consultants, 28 rue du Village, 1214 Geneva McConnell Martin, Metropole House, 95/97 Donegall Street,
(+ 41 22 545 51 00) Belfast (+44 28 90 205 900)

Zurich city has an estimated 7.5 million m2 of office stock. Belfast has an estimated 750,000m2 of office stock. The office
The office market came alive again at the end of 2009 with market continues to undergo a period of stagnation with demand
enquiries from a broad range of tenants, many of which have from both the public and private sectors having virtually dried
been converted into leases in the first half of 2010. Interest in up over the past 12 months. Take-up for 2009 reached just
prime city space has come from finance, either for expansion 7,430m², a 60% decrease on the previous year, and the outlook
or the setting up of new offices. Demand in Zurich West has for 2010 is bleak with activity levels likely to be below that
been noted from both financials, particularly those seeking high achieved last year.
quality back office facilities, and industrial companies looking
for modern accommodation. Other areas of interest include Government-led take-up usually accounts for 50-60% of occupier
Oerlikon, Opfikon and Seefeld. activity in Belfast so the public sector cuts will have a devastating
impact on the market with any existing requirements now on
As tenant demand is good, further strong take-up is expected hold. In addition, the private sector continues to focus on cost
in the second half of the year, keeping the office vacancy rate cutting and more economic use of space, further impacting
stable at 3.8%. Furthermore, the number of pre-lets is expected on the already subdued take-up levels. Only one deal of any
to rise as tenants are forced to plan ahead in the face of limited significance was reported during H1 2010, namely the Passport
quality accommodation, and the interest in projects such as Office acquiring 2,462m² at Law Society House, Victoria Street.
CSAM’s Prime Tower in Zurich West is strong.
The Belfast market remains oversupplied. A number of schemes
Competition from new developments will keep rents stable in have completed in the last six months including Obel Tower and
Zurich, although an overhang of vacant offices in some areas The Boat on Donegal Quay and The Soloist and Lanyon Plaza on
will leave some secondary locations facing downward pressure. Lanyon Place. These schemes remain vacant with substantial
incentives on offer to tenants. Construction continues in the
The investment market has continued its slow trajectory over Titanic Quarter where Harcourt achieved an 11,150m² letting to
the first half of the year. A growing number of transactions are Citibank in 2009, which admittedly had been in the pipeline since
being undertaken directly between principals, such as the sale 2007.
of a building in Bahnhofstrasse by Crédit Suisse. But in general
the lack of stock on the market and the gap between buyer and Prime rents have fallen dramatically, dropping from €176/m²/
seller expectations are the major constraints. Notwithstanding annum (£14/ft²/annum) to €135/m²/annum (£11/ft²/annum) in
this, interest is strong, with international investors returning to the city centre over the past 12 months. Further downward
the market. pressure on rents is expected over the second half of the year,
with continuing generous incentives packages, in a bid to secure
tenants.
The investment market remains subdued in Belfast with prime

yields moving out from 6.50% to 7.00% in the city centre,
although there is limited evidence to support this. However,
activity levels are likely to increase when banks start to offload
distressed stock and there is some evidence that investment
‘vultures’ are beginning to circle Belfast.
Zurich prime rents and yields Belfast prime rents and yields
800 8
200 8
600
400 6
100 6
200
0 4
2006 2007 2008 2009 Q2 2010* 0 4
2006 2007 2008 2009 Q2 2010
Prime rent (€/m2/annum) Prime yield (%)

Prime rent (€/m2/annum) Prime yield (%)
24
UNITED KINGDOM - UNITED KINGDOM -
Birmingham Bristol
Contact: Agency Jonathan Carmalt Contact: Agency Ian Wills Investment – Oliver Paine
Investment – Richard Goodall King Sturge LLP, 40 Berkeley Square, Bristol BS8 1HU
King Sturge LLP, 45 Church Street, Birmingham, West Midlands, (+ 44 117 927 66 91)
B3 2RT (+44 121 233 2898)
Prime yield 6.00 7.50 Prime yield (%) 5.75 6.25
The Birmingham office market saw a reasonable start to 2010 Bristol’s occupier market was surprisingly resilient during the
with the Office for Legal Complaints acquiring 3,775m² in the first half of 2010 with a clutch of prime deals completing in the
city centre. However, demand generally remains subdued city centre during the first quarter including 2,044m² to Ernst &
with central Birmingham take-up reaching 26,460m² during H1 Young at The Paragon, a further 2,230m² to NFU at Templeback
2010. Office activity in the second half of the year is likely to and 1,858m² to The College of Law at Temple Circus. In addition,
remain fragile with few known larger requirements in the market a further 2,044m² was taken out-of-town at Harlequin Business
coupled with the uncertainty of public sector cuts. On this basis, Park by the Police Authority. In contrast the market for second
take-up for 2010 as a whole is expected to be in the region of hand space has seen limited occupier demand so far this year.
46,450m², 24% down on the level achieved in 2009.
Take-up during 2010 is expected to be in line with the levels
Availability rose sharply in Birmingham in 2009 following an influx achieved in 2009 when 30,380m² was transacted in the city
of Grade B space returned to the market and the completion of a centre and 24,900m² out-of-town. Bristol has a broad occupier
number of new-build schemes. While supply levels now appear base so is better placed than some cities but may suffer some
to have plateaued, the vacancy rate for central Birmingham downturn in demand following restrictions in public sector
was in the region of 22.0% at mid 2010, the highest of all the spending.
major regional city centres. Not surprisingly, no new speculative
schemes are expected to start on site for the foreseeable future. Bristol city centre has the lowest vacancy rate in terms of prime
accommodation of any of the Big 6 regional cities, with a rate of
Despite difficult market conditions, a good range of office 10.0% (down from 12.0% in 2009) expected at year-end. The
supply now exists together with some highly competitive speculative start on site in Q1 2010 of the 10,500m² Bridgewater
occupier terms and there are early signs that some occupiers House at Finzels Reach demonstrates confidence in the Bristol
are seeking to forward agree transactions in advance of the end market in light of relatively constrained prime supply. This is the
of their current lease liabilities in order to take advantage of such only new speculative development activity in any of the major
terms. Prime rental levels and the incentives offered to tenants regional city centres during H1 2010 and is due for completion
stabilised during H1 2010, although going forward the rental in 2011.
outlook for Birmingham remains uncertain. Prime city centre
rents stood at €331/m²/annum (£27/ft²/annum) at H1 2010. Prime city centre rents have seen a slight uplift over the past 12
months to €337/m²/annum (£27.50/ft²/annum) and are expected
The latter half of 2009 saw increased investor activity in to remain at this level throughout 2010. Out-of-town rents
Birmingham and a dramatic compression of initial yields for prime have stabilised at €258/m²/annum (£21/ft²/annum). However
Grade A offices. There were a number of notable transactions occupiers are expected to continue to look at driving down costs
during this period including the sale of 7, 8 & 10 Brindleyplace and obtaining rental incentives, impacting on net effective rental
(25,718m²) for £101.5m (7.00%). By the end of 2009 and into levels.
Q1 2010 yields had moved in significantly with No.2 St Philips
Place acquired by the German fund SEB for £29m (5.85%) and The weight of money continues to fuel demand for prime
Rutland House sold to Aviva Investors for £27m (6.10%). investment property in Bristol and during Q2 2010 the British
Steel Pension Fund purchased 1 George’s Square at 5.75%. The
However, with the continuing shortage of prime investment current cycle is likely to have peaked at this level, although the
opportunities in the market place and continuing uncertainty over lack of prime supply will stabilise yields. Investor appetite for
rental levels in an oversupplied occupational market, a softening secondary and tertiary space remains limited as void periods and
of prime yields to the long term average for the city of between weak tenant demand are of considerable concern going forward.
6.25% and 6.50% is expected over the latter half of 2010.
Birmingham prime rents and yields Bristol prime rents and yields
500 8 500 8
250 6 250 6
0 4 0 4
2006 2007 2008 2009 Q2 2010 2006 2007 2008 2009 Q2 2010
25
Cardiff Edinburgh
Contact: Agency – Andrew Hayes Contact: Agency John Clement

Investment – Jonathan Phillips Investment – Chris MacFarlane
King Sturge LLP, Haywood House, Dumfries Place, Cardiff CF10 King Sturge LLP, 7 Castle Street, Edinburgh, EH2 3AH
3UE (+44 29 2022 7666) (+ 44 131 225 4221)

Cardiff continues to see subdued take-up levels as occupiers Edinburgh has an estimated 2 million m² of office stock. Take-up
remain cautious. Take-up for 2010 is expected to be in the region held up well during 2009 and reached 46,450m², but remained
of 32,000m², about 30% below the long term average. While 30% below the long-term average. This steady level of take-
there are limited new enquiries some occupiers, with breaks up was achieved despite the highly unfavourable economic
or lease expiries, are taking the opportunity to trade up with conditions and Edinburgh’s exposure to the banking sector.
extensive rental incentives on offer, often the equivalent of 2 ½ Take-up for 2010 is expected to be similar to 2009, predominantly
years’ rent. in transactions below 930m². There are very few corporate
occupiers looking for space in Edinburgh at present, so demand
The widely anticipated public sector cuts are an additional is expected to come from the indigenous market, typically the
threat to demand for office space in Cardiff. The combination local professional sectors.
of reduced public sector activity and the likely release of second
hand space back to the market by this sector will further increase During 2009 a number of new schemes completed in Edinburgh,
the imbalance between supply and demand. boosting the supply of Grade A space in the market. The vacancy
rate stood at 12% at mid-2010, its highest level since 2003.
An increase in available second hand space has pushed Cardiff’s However funding difficulties and low demand will continue
vacancy rate up to 12.5% and this is expected to increase to to discourage new projects and the vacancy rate is therefore
nearer 13.5% by year-end. However, available Grade A space not expected to rise further. Prominent available schemes
remains relatively scarce, and limited development activity in Edinburgh city centre at mid-year include Exchange Place
indicates there is likely to be a shortage going forward. The (19,500m²), Waverley Gate (18,900m²) and Tanfield (17,700m²).
only speculative activity currently on site is J R Smart’s Capital
Prime city centre rents stabilised at €344/m²/annum (£28/ft²/
Quarter, which will provide 3,425m² of new office space when it
annum) during the first six months of 2010 but out-of-town
completes in winter 2010. When developer confidence returns
rents have fallen to €221/m²/annum (£18/ft²/annum). The level
there are a number of ‘oven ready’ sites in the city centre
of incentives is typically three months for every year of the
including MEPC’s Callaghan Square and future phases of JR
lease. For the rest of the year, city centre rents are expected to
Smart’s Capital Quarter.
remain stable while out-of-town rents are likely to face further
downward pressure.
At H1-2010 rents in the city centre stood at €257/m²/annum
(£21/ft²/annum), whilst out-of-town office rents were €194/m²/ The city’s investment market experienced a strong start to 2010
annum (£15.75/ft²/annum). Prime headline rents remain steady with good interest from institutions in prime stock. Over the
although incentives continue to come under pressure. past 12 months prime yields have moved in from 7.25% to
6.00%, as evidenced by the sale of Edinburgh Quay 2 at the
Cardiff’s investment market saw a bounce in activity levels end of 2009 for £28 million. Going forward the prime market is
during late 2009 and into the start of this year, resulting in a expected to stabilise although there will be limited good quality
significant yield shift to 6.50% for city centre offices (7.75% 12 stock for sale. The secondary market remains poor with yield
months ago) and 7.00% out-of-town (9.00% 12 months ago). differentials widening to reflect the inherent risks associated
However, there are concerns that this level of activity is now with this sector. The out-of-town market remains challenging,
starting to falter. There is still a weight of money chasing prime which can be attributed to the short term nature of the lease
investment product but the market for secondary stock is likely periods on properties which have been offered on the market,
to become increasingly polarised. and reflecting this yields have moved out to 10.00%.
Cardiff prime rents and yields Edinburgh prime rents and yields
600 8 500 8
300 6 250 6
0 4 0 4
2006 2007 2008 2009 Q2 2010 2006 2007 2008 2009 Q2 2010
26
Glasgow Leeds
Contact: Agency - Campbell Hart Contact: Agency – Richard Thornton

Investment – Chris Macfarlane Investment – Andrew Summersgill
King Sturge, 6th Floor, 145 St. Vincent Street, Glasgow, G2 5JF King Sturge LLP, City Point, 29 King Street, Leeds, LS1 2HL
(+44 141 204 2221) (+44 113 244 1441)

Occupier activity in Glasgow held up well in 2009 despite difficult Following a further deceleration in activity in 2009, the Leeds
market conditions. City centre take-up reached 38,100m² but market faces a subdued 2010 with take-up levels likely to be
much in line with the previous year, in the region of 55,740m².
was skewed by four large transactions which accounted for over The market continues to be dominated by smaller transactions
50% of total activity. Demand levels fell sharply during H1 2010 below 465m² and there are few corporate requirements in
with take-up for the market as whole reaching just 11,150m². excess of 930m². During the first six months of 2010 there were
With little sign of new occupiers entering the market and no transactions over 1,400m² in the city centre.
uncertainty over public sector activity, take-up for the year as a
The vacancy rate for Leeds stands at 13% and, while there is an
whole is likely to be in the region of 37,160m². oversupply of Grade A space, the majority of this is outside the
traditional core. With development on hold and no new activity
At H1 2010 there was 35,300m² of new Grade A space available expected to start on site, any further rise in availability in the city
for occupation in Glasgow and, given market conditions, centre will depend on second-hand space. Out-of-town supply
competition for tenants is intense and incentive levels are remains plentiful, with vacancy rates likely to remain higher for
longer.
commensurately generous. However, a dry development pipeline
through to 2011/12 and some stabilising of the economy is likely However there are tentative signs that business confidence is
to lead to a shortage of Grade A space over this timeframe which returning and as occupiers adapt to market conditions there is
should encourage another development cycle. likely to be some churn as they seek to exploit the incentives
on offer or regear leases on more favourable terms. Headline
prime city centre rents rose marginally to €331/m²/annum (£27/
The current supply of residual Grade A space is putting pressure ft²/annum) over the 12 months to end H1 2010 while out-of-town
on headline rental values. Over the 12 months to end H1 2010, rents fell to €221/m²/annum (£18/ft²/annum). Both markets are
city centre rents reduced from €350/m²/annum (£28.50/ft²/ expected to face downward pressure over the next six months.
annum) to €306/m²/annum (£25.00/ft²/annum) but are likely to
stabilise over the next six months. Out-of-town rents, skewed The first quarter of 2010 saw an improvement in investment
activity and further compression in prime yields as funds re-
by oversupply in developments with Enterprise Zone status, entered the Leeds city centre market. In February 2010 No
have fallen to €190/m²/annum (£15.50/ft²/annum) and are likely 1 Whitehall Riverside was sold to NFU Mutual for £51.3m,
to ease back further to (€153/m²/annum (£12.50/ft²/annum). reflecting a yield of 5.95%. While activity levels slowed into Q2,
Incentives remain generous with tenants comfortably receiving there is evidence of increased appetite for good quality multi-let
three years rent free or cash equivalent on a 10-year lease. city centre opportunities, in particular where there is potential to
add value and there is a spread of risk. Prime yields are expected
to remain stable in the city centre over the latter half of 2010 but
Glasgow’s investment market was revived during the latter half there is likely to be some outward movement out-of-town.
of 2009 and into Q1 2010 with city centre prime yields moving in
from 7.25% to 5.75%. A number of city centre buildings were The first quarter of 2010 saw an improvement in investment
sold for in the region of 6.00% and Broadway One was sold to activity and further compression in prime yields as funds re-
entered the Leeds city centre market. In February 2010 No
KanAm in January 2010 for 5.75% (£51m). Out-of-town, where 1 Whitehall Riverside was sold to NFU Mutual for £51.3 m,
the concentration of prime stock is less, yields have moved reflecting a yield of 5.95%. During Q2, the BT building on
in from 9.00% to 8.00%. Going forward the funds will remain Sovereign Street, which is let to BT Plc for a further 10 years,
focussed on prime stock with solid fundamentals whilst the was sold at £40.175 m, reflecting an initial yield of 6.75%. While
secondary market will come under pressure in terms of pricing. investment activity levels have slowed slightly over the last two
quarters, there is evidence of increased appetite for good quality
multi-let city centre opportunities, in particular where there is
potential to add value and there is a spread of risk. Prime yields
are expected to remain stable in the city centre over the latter
half of 2010 but there is likely to be some outward movement
out-of-town.
Glasgow prime rents and yields Leeds prime rents and yields
600 8 500 8
300 6 250 6
0 4 0 4
2006 2007 2008 2009 Q2 2010 2006 2007 2008 2009 Q2 2010
27
Central London Manchester
Contact: Agency – Mark Bourne/Chris Watkin Contact: Agency Chris Mulcahy

Investment - James Beckham/Simon Beckett Investment – Simon Merry
King Sturge LLP, 7 Princes Street, London EC2R 8AQ King Sturge LLP, One Piccadilly Gardens, Manchester M1 1RG
(+ 44 20 7796 5454) - City (+ 44 161 236 8793)
King Sturge LLP, 30 Warwick Street, London WIB 5NH
(+ 44 20 7493 4933) – West End
City West End In-town Out-of-town

Prime yield (%) 5.25 4.75-5.00 Prime yield (%) 6.00 7.50
Central London offices have seen a turnaround in fortunes over Manchester currently has an estimated 1.3 million m² of office
the last 12 months. The West End occupier market performed stock. While take-up in the city centre was down 10% in 2009 the
better than expected in the first half of 2010. Activity in H1 2010 wider Manchester market boosted overall take-up to 176,510m²
was close to the 2009 total and a decline to sub-6% vacancy with a number of larger transactions contributing to the market’s
rates has again signalled rental growth. Prime rents have risen resilience. However, occupier demand has noticeably dropped
by 8% from the lows of end-2009 (in sterling terms), and there in 2010 with the level of enquiries and completed transactions
are now super-prime deals signing in excess of €1,000m² / reducing. City centre take-up is expected to be in the region
annum. of 51,100m² in 2010, down a third on the level achieved the
previous year.
In the second-half of this year, rental growth will be driven by the
shortage of Grade A space, particularly in the Core. Developers The largest deal of the year so far in the city centre is Marks and
are responding to this and starting new schemes, while there will Spencer acquiring 1,950m² in Spinningfields for administrative
be opportunities for landlords to bring quick refurbishments to purposes. Whereas public sector demand boosted an otherwise
market. Take-up may moderate in H2 2010, as the first half was subdued city centre market in 2009, cutbacks in this sector will
peppered with some unusually large deals. But the 307,000m² have a negative impact on demand levels in 2010.
expected is in line with the long-term market average.
However, the level of supply in Manchester is reducing so the
The City of London office market has also seen a marked market remains in balance. Vantage Point (4,580m²), the only
recovery. Letting activity has surged, with 250,000m² signed for new space under construction in the city centre, completed
in H1 2010, while vacancy has declined to 8.9% as availability at the start of the year and the supply tap is now fully turned
sunk to an 18-month low. As a result, prime rents have risen off. The Grade A large floorplate market is seeing the greatest
from their trough of just above €500m² to the mid-2010 level of reduction in availability.
€626m²/annum.
Following a decline in rents in 2009 there has been some
With significant space under-offer, City take-up is expected to stabilisation in prime rents (at local currency levels) during 2010
reach a three-year high of 418,000m² in 2010. An extremely and due to shortages of new Grade A space an increase in net
limited development pipeline in the years to 2012 implies further effective rental levels is expected during the latter half of 2010.
strong rental growth ahead as well. In addition, with demand Headline rents in the city core remained at €350/m²/annum
expected to far outstrip new supply, there is also an expectation (£28.50/ft²/annum) at mid-2010, while South Manchester out-
that pre-lets will return to the market in the near future. of-town rents stabilised at €227/m²/annum (£18.50/ft²/annum).
The Central London investment market has remained healthy, Investor demand for prime central Manchester offices picked
building on the strong inflows of H2 2009. With buoyant demand up during the first half of 2010 following two years of limited
from both overseas and domestic investors, the result has prime stock availability. The first 6 months of 2010 saw £249.9
been a competitive market for prime stock and further yield million invested in 3 transactions, compared to a total of just
compression over the last six months. This has been reinforced £166.0 million for the preceding two years. The largest of these
by the healthy rental growth emerging in the occupational was Aerium’s acquisition of 3 Hardman St from Allied London for
market. By mid-2010, prime yields were below their long-term £182.5 million (6.30%), the City’s largest ever office investment
average in both City and West End. The uncertain economic
transaction. Yields for modern well let buildings are expected to
climate, however, means that any further inward movement will
remain in the region of 6.00% - 6.25% for the remainder of 2010
be limited in the rest of 2010.
with one building under offer at 6.00% at end-Q2.
London prime rents and yields

2,000 8
Manchester prime rents and yields
500 8
1,000 5
250 6
0 2
2006 2007 2008 2009 Q2 2010 0 4
2006 2007 2008 2009 Q2 2010
Prime rent - City (€/m2/annum) Prime yield - City (%)
Prime rent - West End (€/m2/annum) Prime yield - West End (%) Prime rent (€/m2/annum) Prime yield (%)
28
Newcastle Thames Valley
Contact: Agency – Simon Taylor Contact: Agency – Piers Leigh

Investment – Dickon Wood Investment – Angus Minford
King Sturge LLP, 51 Grey Street, Newcastle upon Tyne, NE1 6EE King Sturge LLP, 30 Warwick Street, London W1B 5NH
(+ 44 191 1279 0011) (+44 20 7493 4933)

Newcastle has an estimated 2.6 million m² of office stock, of The Thames Valley has an estimated 5.7 million m2 of office
which around 1.4 million m² is located out-of-town, much of it stock. It covers a large triangular area of the South East of
within Enterprise Zones. Unlike the majority of other UK office England, spreading westwards from London, roughly bounded
centres, Newcastle had a strong 2009 with demand levels up by the M40 and M3 motorways, encompassing the important
49% on the previous year. This surge in take-up was driven by office markets of Reading, Maidenhead, Bracknell, Slough and
activity in the out-of-town market including Tesco Bank acquiring Heathrow.
9,476m² at Quorum.
Following a challenging 2009 the Thames Valley experienced a
Activity levels in Newcastle will be more restrained during 2010 relatively strong start to 2010, although take-up remains below
with take-up levels expected to be in the region of 24,150m², the five-year quarterly average of 36,230m². During the first
so down 64% on the exceptional level seen in 2009.The first six months of the year, 61,410m² of office space was taken-
half of 2010 has seen an absence of enquiries over 930m² and up in the Thames Valley, up 42% on the same period last year.
unsatisfied public sector requirements have been put on hold. Take-up has been boosted by GE acquiring 11,446m² at The
Ark, Hammersmith; the largest deal in the Thames Valley since
Vacancy levels are comparatively low in Newcastle when Q2 2008. Going forward, at mid 2010 the Thames Valley had
compared to some other UK regional office centres. At H1-2010 56,670m² under offer, the highest level since our records began
the vacancy rate stood at 8.5% and is expected to increase in 2004. The increased activity shows corporate confidence
to 9.0% by year-end. The supply of second hand stock is returning to the market after a period of delayed decision making.
expected to increase as break clauses are exercised and leases
not renewed, in particular by public sector occupiers. There The level of available office space has continued to increase
over the past 12 months and stood at 732,810m² at mid 2010,
continues to be development activity in the out-of-town market
up 11.0% on the same period last year. The current level of
where various incentives are available, but Grade A supply in the
supply equates to a vacancy rate of 12.9%. The development
city centre is relatively limited. During H1 2010 Wellbar Central
pipeline remains switched off with just one speculative scheme
completed bringing 11,150m² to the city centre but there is
remaining under construction and due to complete late this year
otherwise no new development activity in the core. (Shepherd Developments’ 6,790m² in Maidenhead). No new
schemes are expected to start on site this year.
Prime rents for in-town office space remained stable (at local
currency levels) at €257/m²/annum (£21/ft²/annum) during Headline prime rents have seen a modest decline over the past
H1 2010 while prime rents in the out-of-town Enterprise Zone 12 months to stand at €343/m²/annum (£28.00/ft²/annum). The
schemes saw headline rents fall from €208/m²/annum (£16.50/ level of incentives being offered to tenants is likely to have
ft²/annum) to €193/m²/annum (£15.75/ft²/annum) over the peaked and with shortages of Grade A space anticipated in some
course of 12 months. Downward pressure on both city centre key town centres we expect some growth in net effective rents
and out-of-town rents is expected into H2 2010 as landlords in these locations, particularly West London suburbs, over the
struggle to retain tenants. next 12-15 months.
There has been further yield compression with city centre Yield levels for prime assets in the Thames Valley experienced
prime yields moving in from 8.25% to 6.75% over the course a significant yield shift in the 12 months to mid 2010, moving
of 12 months. This is evidenced by Legal & General purchasing in to 6.25%. Optimism has been fuelled by the ‘ripple effect’
Sandgate House (2,740m²) for £9.450m (6.75%) in January from Central London markets, favourable forecasted rental
2010. The out-of-town market has seen yields move in from growth rates and the limited amount of new development in the
10.00% to 8.00% over the same period. However, institutional core centres over the last five years. The strongest demand
demand is very selective and while the prime investment market continues to be for in-town, modern offices in established
is expected to stabilise over 2010, yields in the secondary market centres, however these assets are in short supply with investors
may be harder to maintain. reluctant to sell these opportunities.
Newcastle prime rents and yields Thames Valley prime rents and yields
500 10 500 8
250 250 6
0 4 0 4
2006 2007 2008 2009 Q2 2010 2006 2007 2008 2009 Q2 2010
29
BULGARIA - Sofia CROATIA - Zagreb
Contact: Agency and Investment – Andrew Peirson Contact: Agency and Investment – Jens Moller Madsen
King Sturge EOOD, 5 Lege Street, 1000 Sofia, Bulgaria King Sturge d.o.o., Eurotower, Ivana Lučića 2a, 10 000 Zagreb
(+359 2 980 70 08) (+ 385 1 4826 114)

Sofia had an estimated 1.05 million m2 of modern office stock Zagreb has an estimated 804,000m2 of office stock. Take-up in
at mid 2010. Bulgaria is still in the grip of recession and the 2009 was just 18,000m², which represented a sharp drop from
office market remains under pressure in 2010, with very little 2008. Demand has stabilised in 2010, with take-up forecast at
occupier activity. The total year take-up forecast for 2010 is 20,000m² for the year as a whole - a marginal improvement,
around 60,000m², which would represent a further decline from albeit still below the five year average.
the 2009 level of 65,000m².
New construction of Grade A space has virtually ground to a halt
In terms of delivery of new office stock, a number of buildings in Zagreb in recent years. In 2010, construction is expected to fall
have recently been, or are close to being completed and this will to just 16,000m². However, the accelerated drop in demand has
add further to an already over-supplied out-of-town office market. outpaced even the reduction in construction levels. Combined
The development pipeline is expected to bring 234,000m² of with weak employment trends, this has resulted in an increasing
new construction to the market in 2010 and this, combined with vacancy rate for office space within Zagreb, rising from around
weak occupier demand, could see the vacancy rate double from 3.0% in 2008 to around 7.5% in 2010.
15.0% at the end of 2009 to around 30.0% by the end of 2010.
The city centre market still has an under-supply of good quality Prime rents have fallen over the last year to €192/m²/annum.
office product and this will not change during 2010. Tenants are The drop has been milder than expected, but weak occupational
tending to remain in older offices or to relocate out of the centre. demand over the last three to six months and rising vacancy are
likely to bring further downward pressure in the next six months.
Prime office rents in Sofia have fallen over the past year, from The continuing weakness of the economy may also increase the
€264/m²/annum in mid-2009 to around €228/m²/annum at need for flexible leases, shorter terms, and more breaks and
mid-2010. In the short term, there are a small number of key tenant incentives.
tenants looking at the market and much will depend on whether
they decide to remain in their existing buildings. Landlords During H1 2010 there was a recovery in investor confidence,
are becoming increasingly flexible and there is now a general though no office transactions were recorded. The weakness
awareness that rents must come down in order to attract was partly attributable to a lack of suitable product. During the
tenants. second half of 2010, investment demand will remain stable
and confidence is likely to hold up, but demand is expected to
There is virtually no activity in the Sofia office investment market. remain subdued in line with weak market fundamentals. Prime
Investors are shying away from Bulgaria due to a lack of good- office yields have moved out by 25bp to 8.50% over the last 12
quality leased product and the attention of western investors months.
is still on more central eastern european countries such as
Poland and the Czech Republic. Historic investors in the region,
including the UK and Greece, are generally inactive and there is
still no real sustainable interest from the German and Austrian
funds. Uncertainty over future supply levels, and an increasing
vacancy rate, puts off institutional investors.
Sofia prime rents and yields Zagreb prime rents and yields
300 10 300 10
200 8 200 8
100 6 100 6
0 4 0 4
2006 2007 2008 2009 Q2 2010 2006 2007 2008 2009 Q2 2010
Note: Rents and yields (2006-8) from secondary sources
30
CZECH REPUBLIC - Prague ESTONIA - Tallinn
Contact: Agency and Investment – Angus Wade Contact: Agency and Investment – Vitali Kõllomets
King Sturge s.r.o., Bredovský dvůr, Olivova 4, 11000 Prague 1 Re&Solution, Foorum House, Narva Road 5, Tallinn 10117
(+ 420 234 703 333) (+372 631 4533)

Prime rent (€/m²/annum) 252 174 Prime rent (€/m²/annum) 175 105-110
Prague has an estimated 2.7 million m2 of office stock. Despite By the beginning of 2010, Tallinn office stock was estimated at
being one of the stronger economies in emerging Europe, the 530,000m². Occupier demand has been generally weak over the
Czech Republic has not escaped the global economic crisis. This past year as many companies reviewed employee numbers and
was reflected in weakened demand for office space in Prague froze their expansion plans. Most of the activity has comprised of
over the past year. Take-up in 2009 was 244,000m², a reduction rent renegotiations. Stronger local and international companies
of around 6% from the 2008 level. Demand is also forecast to fall mostly stayed in the same office locations, but negotiated
again slightly in 2010 to around 230,000m². rental discounts in the region of 25-30%. However, a number of
small local companies were able to use the conditions to their
Construction of new offices in Prague has spiralled downwards. advantage and move from lower grade buildings to cheaper, new
The level delivered to the market in 2009 was 162,000m², offices with lower utility costs.
less than half that of 2008. This sharp contraction is forecast
to continue in 2010 with only 55,000m² of new stock coming There is currently a large imbalance between supply and
online. Currently only projects with a secured minimum of 50% demand in the Tallinn office market. Stock in the city increased
of pre-lease are making it to the construction phase. Despite this rapidly in just a few years and there is now an over-supply of
reduction in new construction, the vacancy rate had increased good quality offices, with not enough tenant demand to fill the
to 11.8% by the end of 2009 and is forecast to increase to space. As unemployment is expected to rise further in 2010, it is
13.5% by end-2010, as several large companies are expected unlikely that much of the oversupply will be absorbed in the year
to relocate from their current premises. Looking ahead, Class ahead. The vacancy rate was 14.0% at the end of 2009 and is
A schemes will not be difficult to let, but secondary stock will forecast to rise to 15.0% by the end of 2010. Development has
remain hard to shift. ground to a halt with almost no planned construction in 2010. It
is thought that new speculative developments will not start for
Increased supply and falling demand contributed towards at least couple years due to the current oversupply and lack of
declining rents over the past year. Prime rents are now around finance. Any new activity will be built-to-suit only, but even these
€252/m²/annum, down from €264/m²/annum at the end of 2009. are rare in the current market.
As might be expected, lease renegotiations have risen steadily.
Their share in gross take-up was 58% in Q1 2010, compared Prime rents have generally stabilised at around €175/m²/annum
with just 2% in Q1 2007. in-town and €105-110/m²/annum out-of-town. There may be a
further decline in the second half of 2010, but it is not anticipated
There is steady interest, predominantly from foreign investors, to be significant.
for Czech prime offices. Local investors tend to focus on Grade A
office projects in less attractive locations and Grade B properties There was only one significant investment transaction in the
with low capital values. The largest transaction in the first half Tallinn office investment market in 2009. Eesti Post sold their
of 2010 was the sale of 23,900m² of office space by ECM Real building in the central business district for €8.2 million to a
Estate Development at City Empiria, Na Strzi 65. In the year to private Swedish investor. Since then there have been no further
mid 2010, prime yields have compressed by 25 basis points to transactions. Investment activity is expected to pick up over the
7.00%. rest of the year with investors showing more interest, although
demand is still likely to remain at a low level due to lack of
financing and general market instability.
Prague prime rents and yields Tallinn prime rents and yields
400 10 300 12
200
200 7 8
100
0 4 0 4
2006 2007 2008 2009 Q2 2010 2006 2007 2008 2009 Q2 2010
31
HUNGARY - Budapest LATVIA - Riga
Contact: Agency & Investment – James Kinnell Contact: Agency – Guntars Cauna
King Sturge, Roosevelt Tér 7-8, 1054 Budapest Investment – Irina Nikolajeva
(+36 14 51 10 10) Re&Solution, Vilandes 1, LV – 1010 Riga (+371 6750 8400)
In-town Out-of-town In-town

Prime rent (€/m²/annum) 216 144 Prime rent (€/m²/annum) 204
Prime yield (%) 8.00 10.00 Prime yield (%) 15.00
Budapest has an estimated 2.5 million m2 of office stock. There Offices in Riga are concentrated in the CBD and the Old Town,
has been a significant decrease in leasing transactions over the with a growing trend to move away from the centre. The prime
past year. Office take-up in 2009 was 294,000m² and is forecast development areas with the most potential are the river bank of
to drop to around 200,000m² by the end of 2010. Two of the Daugava, the Kipsala area and main road leading to the Airport.
most significant office transactions in early 2010 were the owner
occupation by Allianz of 17,000m² at the K3 building in Non- Demand for office space has fallen significantly over the past
Central Pest and Ernst & Young’s lease renewal of 5,900m² at year as companies have lowered head-counts and postponed
the West End BC building in Váci Corridor. expansion. Consequently, many development projects have
been halted. The office vacancy rate, which reached around
Vacancy is currently at a historically high level. Around a quarter 18.0% by the end of 2009, is expected to rise to more than
of all office space in Budapest stands empty and new or recently 20.0% by the end of 2010. New schemes are struggling with
completed office space is not being absorbed. Occupiers are vacancy rates of 50.0% or higher.
focused on cost cutting and consolidation, using lower rents
to renegotiate on current space. Development has slowed Low occupier demand and high vacancy have given tenants a
further, with construction down from 300,000m² in 2009 to only strong bargaining position and many rent renegotiations have
135,000m² in 2010. Many projects have either been postponed taken place. In Riga the rental decline peaked in mid-2009, but
or stopped. continued at a slower pace during the latter half of the year. Due
to rising vacancy, further rental decreases are expected during
Prime rents were stable at around €240/m²/annum by mid 2010. 2010.
However, this rate is only applicable to a few prime buildings
in the central business district. Average prime rents are lower The peak of office investment volumes was achieved during
at around €216/m²/annum. Overall, office rents have been 2007 and activity has fallen sharply since. There were no
depressed and non-prime rents decreased by around 10% over significant transactions recorded in the first half of 2010. It is
the past year. difficult to gauge investment yields due to very low transactional
activity. But they were estimated at 15.00% as at mid-2010, with
The investment market has not yet recovered. There has been continuing rental decline putting further upward pressure on
very limited activity in 2010, with only two significant transactions yields. Long term recovery is not expected before the economy
in the first half of the year - the owner occupation by Allianz at improves.
K3 for around €45 million and the purchase of 9,300m² of office
space at Ulloi Ut 48 by Evgyürűk Private Pension Trust for around
€14.2 million. Prime yields have remained unchanged over the
past 12 months, staying in the region of 8.00% at mid-2010.
Budapest prime rents and yields Riga prime rents and yields
400 10 400 16
200 200 10
0 4 0 4
2006 2007 2008 2009 Q2 2010 2006 2007 2008 2009 Q2 2010
32
LITHUANIA - Vilnius POLAND - Warsaw
Contact: Agency and Investment – Neringa Rastenyte Contact: Agency – Tomasz Buras
Re&Solution, Jogailos str. 4, LT-01116 Vilnius Investment – Jarosław Wnuk
(+370 5 252 6444) King Sturge spółka z ograniczoną odpowiedzialnością Sp.K.,
Deloitte House, Al. Jana Pawła II 19, 00-854 Warsaw
(+48 22 256 08 00)

Vilnius has an estimated 335,000m2 of office stock. The current Warsaw has an estimated 3.38 million m2 of office stock.
economic background remains challenging and activity in the Occupier demand fell dramatically in 2009 to around 280,700m²,
city’s office market has slowed further over the past year. Take- half the level of the year before. However, the first 6 months of
up was 61,000m² in 2009 and is expected to fall to around 2010 have seen a recovery in occupier demand with 222,800m²
40,000m² in 2010. taken up. In the year as a whole, take-up of 450,000m² is
forecast, higher than the five-year average. As in many other
The majority of activity last year centred on rent renegotiations. eastern European cities, renegotiations and lease extensions are
Companies generally stayed in the same offices, but renegotiated an important part of the market. Given recent market conditions,
rent reductions of 25-30%. Many small local companies also landlords have been amenable to offering softer deals with
moved to lower grade buildings or closed altogether. In 2010, lower rents.
take-up will be driven by large companies seeking to relocate at
more attractive rents, along with international entrants seeking The vacancy rate has increased sharply in recent years and
more competitive labour costs (such as Barclays and Western reached 8.0% by mid-2010. Vacancy levels are expected to
Union). decrease to around 7.0% by year-end in response to improved
occupier demand and a lower level of new construction.
Development in 2010 is expected to deliver around 25,000m² of Construction is set to fall roughly a third in 2010. This should
new office space to the market, a reduction of around 74%. New help to rebalance demand and supply, though 2011 is likely to
speculative projects will not start for at least 18 months due to see renewed development ahead of UEFA Euro 2012.
a lack of finance, leaving only built-to-suit facilities as viable. The
vacancy rate is forecast to fall from last year’s 22.0% to 15.0% Average prime rents are in the region of €276/m²/annum
by the end of 2010 in part due to this lack of development. and are expected to remain stable over H2 2010. However, a
combination of economic recovery and UEFA 2012 mean that
Average rents have been stable over the past year and are rental rates are expected to rise over the medium term.
expected to remain unchanged for the rest of 2010. Prime
offices may see moderate rental growth, however, due to the There has been a significant increase in office investment
limited availability of suitable stock. transactions in 2010. The largest transaction in Q1 was the sale
of Trinity Park III by Ghelamco to SEB ImmoPortfolio Target
There have been few office investment transactions. Business Return Fund for around €93 million. The outlook for investment
sentiment has improved slightly and local investors are now volumes in the year as a whole is brighter than in 2009 due to
actively exploring the market to evaluate opportunities. the positive state of the Polish economy and the revival in global
Transactions of up to €20m are likely to increase over the markets. Prime yields moved in by 50 basis points from mid-
remainder of 2010. 2009 to mid-2010 where they are expected to flatten off.
Vilnius prime rents and yields Warsaw prime rents and yields
300 12 500 8
150 8 250 6
0 4 0 4
2006 2007 2008 2009 Q2 2010 2006 2007 2008 2009 Q2 2010
33
ROMANIA - Bucharest RUSSIA - Moscow
Contact: Agency and Investment – Ben Binns Contact: Agency – Alexey Bogdanov
King Sturge SRL, 5 Gheorghe Manu Street, Sector 1, Bucharest Investment – Vladimir Avdeev
010445 (+40 21 311 54 44) S.A.Ricci, in association with King Sturge, Pyatnitskaya str., 74,
bld. 2, Moscow (+ 7 495 790 71 71)
In-town Out-of-town In-town

Prime rent (€/m²/annum) 252 168 Prime rent (€/m²/annum) 600
Prime yield (%) 9.50 10.00 Prime yield (%) 12.00
Bucharest has an estimated 1.6 million m2 of office stock. Moscow has an estimated 12 million m2 of office stock. The
Demand for office space in the city dropped to around global financial recession impacted significantly on office
100,000m² in 2009. However, at the start of 2010 there has occupier demand in Moscow, causing a reduction of around 80%
been an increase in leasing activity, as occupiers started to take in leasing activity. Total take-up in 2009 was just 230,000m².
advantage of favourable market conditions where lease breaks However, a market recovery started in Q1 2010, first at a very
and terminations permitted. By the end of H1 2010 take-up was slow pace and then continued in Q2 with a more significant
already at 70,000m² and is forecast to exceed last year’s total in upturn. Total take-up in H1 2010 was almost double the whole
2010 as a whole. of 2009, at around 450,000m² and this upward trajectory is
forecast to continue to a level of around 1.2 million m² for the
Occupiers are keen to cut costs and this has resulted in year. There is a shift towards owner-occupier acquisitions or
renegotiation of lease agreements, relocation to better quality long-term leases of large premises with the highest demand for
office space at lower costs and a push towards higher incentives. Class A offices. Since the end of Q4 2009, the market has also
Tenants still hold the upper hand over landlords in the negotiation become less tenant oriented with landlords now offering fewer
process this year. incentives.
The vacancy rate has trended upwards since 2007. It was Increased occupier demand has led to a significant reduction in
estimated at 18% by mid-2010. However, increased demand office vacancy. The vacancy rate at the end of 2009 was as high
and lower levels of new construction in the first half of the year as 35.0%, but by mid-2010 was 21.0% and is forecast to fall
should result in a decrease over the second half of the year, to again by the end of the year to 16.0%. There is still a good level
around 16.0%. Delivery of Class A buildings in the first quarter of of new office accommodation being delivered to the market. The
2010 included: City Gate (North Tower), HQ Victoriei, EuroTower level forecast for 2010 is around 1.5 million m², which is on a par
and the headquarters for Piraeus Bank. with the last three years.
Prime rents at mid-2010 were €252/m²/annum, a decrease from In line with the increased volume of transactions, office rents
€264/m²/annum a year ago. Rents may be subject to further have increased from €576/m²/annum in mid-2009 to €600/m²/
downward pressure over the second half of the year as new annum by mid-2010 and are expected to climb further by the
office space is delivered to the market and tenants remain in the end of the year.
driving seat, with landlords forced to discount to avoid vacancy.
The Moscow real estate market is still considered risky by
There was a low level of investment activity in the Bucharest foreign investors, although it is known to have great potential.
office market in the first half of 2010, with little prospect of a Investment volumes in H1 2010 were low. This has partly
pick-up by year’s end as investors remain extremely cautious. resulted from a lack of quality stock to meet the requirements
Prime yields were thought to have softened to a level of 9.50% of foreign investors (central location, full occupancy, high yield).
at mid-2010, an outward movement of 25 basis points from mid- However, overall, investor sentiment is improving and volumes
2009. The lack of activity could see them soften further by the are expected to increase in the second half of the year. Prime
end of the year. city centre yields, which had moved out to 14.00% at the end
of 2009, have moved in again to around 12.00% by mid-2010.
They are expected to be subject to further downward pressure
over H2 2010.
Bucharest prime rents and yields Moscow prime rents and yields
400 12 2,000 15
200 8 1,000 10
0 4 0 5
2006 2007 2008 2009 Q2 2010 2006 2007 2008 2009 Q2 2010
34
SERBIA - Belgrade SLOVAKIA - Bratislava
Contact: Agency and Investment – Srdjan Vujicic Contact: Agency and Development – Miroslav Barnas
King Sturge d.o.o., Usce Tower, Bulevar Mihajla Pupina 6, 11070 Investment and Professional Services – Peter Nitschneider
Belgrade (+381 11 2200 101) King Sturge s.r.o., Europeum Business Center, Suche Myto 1,
81103 Bratislava (+421 259 209 911)
In-town In-town Out-of-town

Old Belgrade Prime rent (€/m²/annum) 168 120
Prime rent (€/m²/annum) 180 Prime yield (%) 7.25 7.75
Prime yield (%) 9.50
Belgrade has an estimated 558,000m2 of office stock. The global Bratislava has an estimated 1.35 million m² of office stock. There
recession has impacted strongly on the office market with were indications of recovery in occupier demand over the first
demand weakening considerably over the past two years. Take- half of 2010. Take-up at the end of H1 2010 was estimated at
44,000m², an improvement on a year ago. The estimate for 2010
up fell by 46% in 2009 to 30,000m² and continued to perform
as a whole is 70,000m², which would represent a healthy rise
at a low level in the first six months of this year. Although the on the 2009 level of 63,000m². This upturn in demand can be
Serbian economy is expected to expand, office demand is set to attributed in part, to attractive incentives provided by developers.
remain weak at around 14,000m² for the full year. These include rent-free periods from one to six months and fit-
out contributions, typically from €20 - €40/m².
The sharp reduction in take-up levels has in turn led to a rapid
increase of supply. The vacancy rate had jumped to 21.0% by New supply of high quality office space for 2010 is forecast at
the end of 2009. Nearly a quarter of all office space is expected 88,000m², the lowest level in recent years. The vacancy rate in
Bratislava currently stands at around 11.5%, a slight reduction on
to be vacant by the end of this year, in part a consequence of last year’s figure, reflecting both the increased level of demand
the amount of Class A stock delivered to the market in 2008 and and the lower level of new product on the market. The vacancy
2009. There has been a sharp deceleration in the construction of rate in modern office schemes is expected to decrease over the
new office buildings, which is set to halve in 2010. second half of 2010, in contrast to secondary properties.
As in other office markets, weak economic prospects have led Prime office rents in Bratislava fell by approximately 10% over
to a high degree of uncertainty and occupiers continue to be the past year and at mid-2010 were around €168/m²/annum.
extremely cautious. The trend has been to stay put and focus Prime rents in the outer area of the city, which will probably
become the new CBD of Bratislava, stood at around €138 – 144/
on renegotiating rents for existing premises. Average prime m²/annum.
rents have held at around €180/m²/month over the past year,
but could be subject to further downward pressure as landlords The office investment market in Slovakia has remained static in
holding assets with high levels of vacancy are forced to offer the first half of 2010. The last significant institutional transaction
larger discounts. occurred in Q3 2008. Since then only smaller office buildings
have been sold to local investors. There has been one other
There have been no investment transactions recorded in the first transaction, completed in December 2009 when RENO bought
an office building in a secondary location (Bratislava – Raca). This
half of 2010 and prime yields moved out by 25 basis points to
included the sale of approximately 7,000m² of offices to strong
9.50% by the end of H1 2010. Weak interest from international tenants at a price in the region of €10-12million.
investors is anticipated over the second half of the year. The
focus will be distressed property sales if banks become more Over the second half of 2010 investors will be mainly interested
active in foreclosures. in properties located in the capital. Property fundamentals
such as location, income sustainability, building quality and
covenant strength are coming under greater scrutiny, with
investors placing more emphasis on reducing underlying risks.
The total volume of the investment transactions is likely to
remain limited. Local investors will continue to dominate the
market, though activity will increase. Nevertheless, Slovakia
has disappeared from the list of the target countries for many
institutional investors, mostly due to the small market size and
its car industry focussed economy. Prime investment yields are
expected to stay at around 7.25%.
Belgrade prime rents and yields Bratislava prime rents and yields
400 20 300 10
15 8
200 150
10 6
0 5 0 4
2006 2007 2008 2009 Q2 2010 2006a 2007 2008 2009 Q2 2010
35
TURKEY - Istanbul
Contact: Agency and Investment – Matthew Warner

King Sturge Gayrimenkul Danişmanliği Limited Şirketi
Üçgen Apt 64/2, Süleyman Seba Caddesi, Vişnezade, Maçka,
34357 Istanbul (+90 212 236 4990)
In-town
Prime rent (€/m²/month:annum) 369
Prime yield (%) 7.75
Like many other European markets, demand for offices in

Istanbul slowed significantly in 2009. However, in the first
half of 2010 there were tentative signs of recovery. Take-up
has increased as business sentiment improved and a growing
number of requirements were registered. Key deals in H1
included: 1,045m² to Consulate of Canada in Levent, 1,077m² to
Accenture in Etiler, 450m² to Servcorp in Nisantasi and a further
500m² to Aes Energy at Metrocity in Levent. Occupiers seeking
Class A space, but not wanting to pay increasing CBD rents,
were increasingly tempted to the Asian side of the city, where
there is more quality stock, with larger unit sizes and lower rents.
The level of vacancy varies hugely between different business

districts. In the modern CBD on the European side of the City,
which stretches from Esentepe through Levent to Maslak,
availability of prime space is limited, especially for units in
excess of 1000 m2. Tenants facing lease renewals often find
themselves having to accept significant rental increases, with
few suitable alternatives. Prime rents in these areas may be
subject to increasing upward pressure over the next two years
due to a lack of product and a time lag before new stock can be
brought to the market.
There are, however, a number of large projects which will help

redress the demand supply imbalance over the medium to
longer term. The timing of these is not clear. Should they happen
simultaneously it could lead to competition and rents levelling,
or even falling. It is more likely however that they will be spread
out over the next 5 years. The new projects are also set to raise
standards of amenity and design. With the prospect of a “flight
to quality” amongst occupiers and a renewed ability to acquire
space offering some scale, rents will remain strong with further
increases likely.
There was a general lack of volume of office investment

transactions in 2009, as those who held stock saw no reason
to sell into a market where purchasers expected recessionary
pricing. There has been a modest increase in the first half of
2010, which is expected to be sustained over the remainder
of the year. The majority of deals are for lot sizes of less than
€20m, as investors hold on to trophy assets. There are positive
signs for recovery over the next few years, as Turkey’s banks
have been cautious in their lending practices and are therefore
better placed to support a credit-funded purchases.
Istanbul prime rents and yields

400 14
200 10
0 6
2006 2007 2008 2009 Q2 2010
* For non Eurozone countries rental trends in Euros will be

Prime rent (€/m2/annum) Prime yield (%) affected by currency movements and may therefore show a
different pattern to local market trends.
36
TAX, ACCOUNTING AND
CORPORATE FINANCE ADVICE
SUPPORTING
YOUR REAL
ESTATE
INVESTMENTS
WHEREVER
THEY ARE.
BDO is the world’s fifth largest accountancy network. We

have 1,100 offices in 109 countries.
For further information on our wide range of services to the real estate sector, please get in touch with
the relevant country contact listed in this report or contact Stephen Herring, UK Tax Partner on
+44 (0)20 7893 2437 or email stephen.herring@bdo.co.uk
www.bdointernational.com
BDO LLP is authorised and regulated by the Financial Services Authority to conduct investment business.
About the BDO International Key tax issues in cross border real
Real Estate Practice estate transactions
BDO International is the world’s fifth largest accountancy Real estate transactions are diverse and complex and
network. It has more than 44,000 people in over 1,100 invariably need to be tailored to fit both the differing
offices across 109 countries. circumstances of the transacting parties as well as the
particular nature of real estate assets.
BDO’s international real estate team provides its clients in
the real estate and construction sectors with a broad range The investor needs to consider the location of the real
of tax, audit, accounting, corporate finance, business estate, the need for and advantages of structuring the
recovery and investment management services. It has investment through a suitable conduit jurisdiction and the
a leading presence in the property industry and uses its tax position of the investment company, real estate fund
extensive international network of offices for the benefit or syndicate.
of its clients and often introduces them to opportunities
and key contacts in other countries. It is invariably sensible to consider firstly the particular
features of the taxation of local real estate. At this level,
The United Kingdom member firm of BDO International, registration taxes, capital duties, withholding taxes on
has co-ordinated the preparation and collation of the rent and interest, the treatment of capital gains and
tax information in the following pages which have been the calculation of taxable rental income including tax
approved by the relevant BDO International member depreciation and earnings stripping or thin capitalisation
firms. aspects will all be key drivers.
Our clients include a wide range of real estate investors It will often, but by no means always, be appropriate to
and developers ranging from listed companies and REITs, interpose a conduit entity in a separate jurisdiction which
through cross-border real estate funds and infrastructure does not tax capital gains or dividends. The commercial
funds to sovereign wealth funds and substantial private needs for this include the flexibility of inward investment
companies and investment syndicates. and the options available for partial or total exits on the
realisation of the investments.
We also act as tax and corporate finance advisers and
auditors to leading professional service firms in the real The structure will require an overarching entity which will
estate and construction sectors. typically be resident in the country of the investors or will
often be a tax transparent entity such as a partnership
Local BDO International real estate tax contacts are listed enabling investors in multiple jurisdictions to invest on a
under each country’s tax section. Alternatively, feel free tax efficient basis.
to contact the London Office real estate tax team as
follows: - Increasingly, in the present market place with more
restrictive access to external bank finance, it will often be
Stephen Herring fiscally efficient for investors to provide shareholder debt
Tax Partner to facilitate future refinancing when debt markets return
Real Estate & Construction to equilibrium. The location for any captive financing entity
Telephone: +44 (0) 20 7893 2437 will have legal, accounting and taxation implications.
Email: stephen.herring@bdo.co.uk
Stephen Herring, Tax Partner, Real Estate & Construction,
Robin Hutton London, comments “as the market continues to emerge
Tax Director from the credit quake, there will be one-off opportunities
Real Estate & Construction to revisit existing ownership structures and entities,
Telephone: +44 (0) 20 7893 2432 enabling investors to implement more favourable cross-
Email: robin.hutton@bdo.co.uk border tax strategies for real estate portfolios”.
Sutharman Kanagarajah
Tax Manager
Real Estate & Construction
Telephone: +44 (0) 20 7893 2335
Email: sutharman.kanagarajah@bdo.co.uk
38
Preface to individual country real Debt finance arrangements have not only become more
estate tax summaries costly but a number of European jurisdictions have
introduced restrictions on the level of debt interest that
It will be appreciated that the taxation legislation, case may be claimed in addition to existing transfer pricing and
law, tax treaties and tax authority practices in all of the thin capitalisation restrictions. New sources of finance are
countries included in the following pages can only be often introduced by way of new equity and achieving a tax
briefly summarised in the space available. deduction for this equity can be challenging as generally a
tax deduction will only be available if interest is charged
Equally it will be understood that real estate transactions to the entity that acquires the real estate. Consideration
are often subject to more complex taxation arrangements will also need to be given to where the interest receipt
than, typically, apply to ordinary trading ventures. will be taxed.
Nevertheless, we consider that these summaries provide
useful insights into the taxation of real estate rental Where an existing property owning company is being
income and capital gains and provide a useful introduction acquired, the waiving of debt or conversion to equity
to indirect taxes in each country. can, in some circumstances, generate adverse tax
consequences and these need to be fully explored.
Invariably, tax treaties give the right to tax real estate Similarly, profit participating debt or arrangements
income to the country in which the real estate is located. for existing owners to retain an interest in the gain on
Most countries, not surprisingly, exercise this right and eventual disposal will need careful planning to optimise
often seek to protect their tax base by applying special the tax treatment.
rules to tax real estate income and control the deductions
available against it. Stephen Herring
Tax Partner
Similarly for capital gains, most countries tax the gain Real Estate & Construction
where the real estate is located but there are important BDO LLP
exceptions which are often a major factor in planning the 55 Baker Street
acquisition approach, structure and entities. London
W1U 7EU
In our view it is imperative, before real estate is acquired, http://www.bdo.co.uk/realestate
not only to decide upon the appropriate ownership
entities and structure but also to prepare a robust financial Disclaimer
projection which includes the incidence of all real estate
taxes which will be payable on its acquisition, ownership BDO International is a world wide network of public
and ultimate disposal. accounting firms, called BDO Member Firms, serving
international clients. Each BDO Member Firm is
Taxation for real estate investors and occupiers in an independent legal entity in its own country. The
challenging times network is coordinated by BDO Global Coordination
B.V. incorporated in the Netherlands, with an office
Following the credit quake there have been a number of in Brussels, Belgium, where the Global Coordination
different factors at play including a lack of prime stock Office is located.
and shortage in both the quantum and pricing of debt © BDO Global Coordination B.V. 2010
finance. Banks have accidently become equity holders
and there continue to be issues related to refinancing
existing debt. Similarly, there are changes such as
portfolio consolidation and renewed activity by sovereign
wealth funds. All of these trends have tax implications
and we have summarised in the paragraphs below some
selected guiding principles for consideration.
When considering cross-border activity for a diverse

group of investors, a key guiding perspective is the
need to avoid tainting the taxation position of one
investment class by the taxation treatment of another
investment class; often this is achieved through the
use of tax transparent structures such as limited liability
partnerships, partnerships or, in some cases, trusts or
trust corporations.
39
Austria between 10% and 20%, depending on the specific asset
category.
Contact: Reinhard Rindler
rindler@bdo.at Generally, capital gains arising on the disposal of real
+ 43 (1) 537 37 322 estate, or the disposal of shares in an Austrian property
holding company, are subject to 25% corporate income
Foreign individuals or corporate investors may invest tax for corporate vendors.
in Austrian property directly, through a partnership or
through a local company. Speculative transactions of individuals for non-business
purposes, (i.e. private purposes) are only taxable if the
Currently, profits realised by companies are taxable in real estate is disposed of within ten years from the date
Austria at the corporate income tax rate of 25%. of acquisition (in special cases fifteen years). Those
taxable gains are taxed at the progressive income tax
A minimum level of corporate income tax is due in loss- rates of up to 50%.
making periods (dependent on the legal status of the
corporation). Such payments can be credited against The provisions of Austria’s double tax treaties generally
“real” liabilities in future periods. Losses can be carried give Austria the right to tax gains on the disposal of
forward indefinitely and they can be offset against up to Austrian real estate wherever the alienator is resident.
75% of annual profits in future periods.
The standard rate of VAT in Austria is 20%. In general,
Profits of individuals are taxed at tax rates of up to income deriving from the disposal or the tenancy of real
50%. Generally, for individuals, taxable rental income estate is exempt from VAT. However, under certain
is calculated upon a cash receipts and disbursements circumstances the option to tax can be exercised,
method, as adjusted by a deduction for depreciation. In allowing the recovery of input VAT.
this case losses cannot be carried forward.
The transfer of real estate is subject to 3.5% property
Partnerships are tax transparent in Austria, with the transfer tax (note: the rate is reduced to 2% if real estate
consequence that each single partner is subject to tax is transferred between close relatives and/or spouses),
in Austria. Each partner in the partnership is taxed at plus a 1% registration fee, based on the consideration
progressive income tax rates of up to 50% (for individuals) paid.
or 25% (for companies).
The transfer of property as a result of a certain type of
For companies, taxable income has to be calculated merger is also subject to property transfer tax. For the
according to GAAP. transfer of all of the shares, or the unification of all of the
shares in the hands of one shareholder, of a company
Generally any expenses incurred for the purpose of the which owns real estate, property transfer tax is also
real estate business are deductible, including maintenance levied. However, the “tax assessed value” is normally
and repairs, administration expenses, financing costs, considerably less than the market value.
insurance premiums, depreciation and real estate tax.
Tax deductions for “substantial” repairs and maintenance Capital transfer tax is imposed at a rate of 1% on the
expenditure have to be spread over a period of ten or contribution of capital to companies, both in the form of
fifteen years (under certain circumstances). cash or in kind.
There is no specific thin capitalisation legislation in Annual property tax of up to 1% is levied on the tax
Austria. However, the tax authorities require reasonable assessed value of Austrian real estate. An additional tax
debt financing arrangements, the terms of which are set of 1% of the tax assessed value of land is payable for land
on an arm’s length basis. For example, where the interest without buildings, meaning that tax on undeveloped land
rate is higher than an arm’s-length rate, a tax deduction is effectively up to 2% of the tax assessed value of the
would be denied for the excess interest. land. Both taxes are deductible for (corporate) income tax
purposes.
Depreciation in respect of buildings, but not land, is tax
deductible. The deductible depreciation is calculated using • The transfer of property in case of inheritance or by a
the straight line method, in which the annual depreciation gift have been subject to inheritance tax and gift tax.
is a fixed percentage of costs. The allowable rate varies Inheritance tax and gift tax were abolished with effect
between 1.5% and 3%, depending on the legal form of from 1 August 2008.
the owner and the use of the property.
Plant and machinery depreciation is allowable at rates of
40
Belgium Corporate entities are subject to the standard rate of

corporate income tax on capital gains as part of their total
Contact: Marc Verbeek income.
marc.verbeek@bdo.be
+ 32 (0) 2 778 01 28 Capital gains on shares realised by individuals are
generally exempt. If realised by companies, they will be
Resident and non-resident companies under corporate exempt, provided the subsidiary meets the “subject to
ownership are ordinarily subject to Belgian tax at a rate of tax” requirement.
33.99% on their taxable income, including rental profits
and capital gains. This rate includes an austerity surcharge If Belgian immovable property is owned by foreign
of 3% which is levied on the corporate income tax rate entities the Belgian double tax treaties generally provide
of 33%. Companies owned directly by individuals can that income from immovable property will be taxable in
benefit from reduced rates where the taxable income is Belgium.
less than €323k.
Fixed assets which have been held for at least five years
A 2.25 % surcharge applies to the final tax liability, unless may qualify for a form of re-investment relief on sale,
adequate quarterly payments are made through the tax which allows the tax to be deferred, providing that the
year. proceeds are reinvested in tangible and intangible assets.
The tax due is spread over the depreciation period of the
For corporate tax purposes, generally the taxable rental new asset.
income and capital gains are calculated on normal
accounting principles, but some special rules apply. Generally, neither the acquisition nor renting of real
estate is subject to VAT, so any VAT charged on costs
Generally, any expenses incurred for the purpose of the and services will be a cost to the business. However, a
rental business are deductible, including, real estate tax, taxable person can opt for the application of VAT when
which is calculated as a percentage of deemed net rental selling or leasing a “new” building. VAT grouping can be
value. However certain specific expenses are disallowed, a valuable option.
such as regional taxes.
Often real estate companies are acquired rather than
Interest paid to connected parties is allowable to the property, due to the perceived high rates of transfer tax
extent that the interest is calculated at a commercial in Belgium.
market rate and thin capitalisation restrictions are
satisfied. There is no fixed safe haven debt:equity ratio The acquisition of Belgian real estate is subject to
in respect of connected party debt. However, when Registration Duty at a rate of 12.5% upon the higher of the
the connected party is a private individual shareholder/ purchase price and market value (except in the Flemish
director, or a foreign corporate director, a 1:1 debt:equity region where the rate is generally 10%). This also applies
ratio generally applies. A debt:equity ratio of 7:1 applies to the transfer of real estate to the shareholders of a real
where the lender is either an individual or a company estate company being liquidated, except when it has the
resident in a low tax jurisdiction. form of an “SPRL”, in which case the Registration Duty
rate is 1%.
There is no system of group taxation in Belgium, so
where a real estate company is acquired, it can often Acquisitions of corporate real estate entities are exempt
be problematic to obtain Belgian tax relief in respect of from Registration Duty but there are, of course, certain
interest on acquisition borrowings. legal, commercial and other taxation issues which would
arise. For example, it is not generally possible to “step-
Depreciation charged under Belgian GAAP on an asset is up” the base cost to market value.
tax deductible.
No capital duty is payable in Belgium on the issue of
For example, plant and machinery depreciation is shares.
generally allowable at rates depending on the respective
standardised useful life. Land itself cannot be depreciated. • Belgium has a tax ruling system whereby advance
Commercial buildings will normally be depreciated at 3% assurance in respect of the tax treatment of a
and industrial buildings at 5%. transaction can be sought from the tax authorities.
• A notional interest deduction is now available for tax
The standard depreciation method is the straight- purposes, calculated as 3.80 % of a company’s net
line method. A declining-balance method is generally equity.
optional, but will for most real estate companies not be • Belgium has had a REIT regime for listed companies
allowed. since 1995 (Sicafi).
.
41
Bulgaria Depreciation is calculated on a straight-line basis. Tax
depreciation in respect of immovable property is tax
Contact: Bogdanka Sokolova deductible. Buildings are depreciated at a maximum rate
bdo@datacom.bg of 4% per year for tax purposes. Land is not depreciable.
+ 359 2 421 06 56 The tax authorities may deny a deduction for tax
depreciation where the company has not undertaken real
Corporate investors may invest in Bulgarian property estate activity during the year.
through local subsidiaries and branches or directly. Direct
investment in land is possible for entities tax resident in On disposals of shares and immovable property belonging
the EU or non-EU jurisdictions with which Bulgaria has an to a Bulgarian company, capital gains arising are included
international treaty. within the income of the Bulgarian company and subject
to CIT.
Bulgarian resident companies are subject to Corporate
Income Tax (“CIT”) at a rate of 10% on rental income The sale of a non resident company which holds shares in
after the deduction of expenses and tax depreciation. a Bulgarian subsidiary which owns immovable property is
not a taxable event in Bulgaria.
Dividends paid by Bulgarian companies are generally
subject to 5% withholding tax, unless the shareholder is Real estate tax is levied on the owners of land and
resident in a country which has a favorable tax treaty with buildings. The tax base is the net book value plus the
Bulgaria. Dividends paid to legal entities resident in the accumulated depreciation cost of the property. Since 1
EU or EEA member states are exempt from withholding January 2010 the tax rates are set by the municipalities,
tax. with the rates varying between 0.01% and 0.25%.
The tax must be paid in one payment or four quarterly
Advance CIT must be paid in monthly instalments, based instalments. A 5% discount is granted if the entire
on the taxable profit for the two previous years. If the amount is paid by 31 March of the year in question.
result from the previous year is a loss, the prepayments
are made on a quarterly basis and are based on the The sale or exchange of immovable property is subject
taxable profit for the year-to-date. The fiscal year is the to transfer tax, the rate of which is fixed by the relevant
calendar year. CIT returns must be filed by 31 March of municipality, the rates varying between 0.1% and 3%.
the following year. The tax is levied on the assessed value of the transferred
property, and in the case of exchange, of the assessed
Generally the transfer of Bulgarian property and rental value of the more valuable property. The threshold for
income is subject to VAT at the standard rate of 20%. non-taxable immovable property for 2010 is BGN 1,680.
However, the following transfers are exempt from VAT: A Notary fee is payable on the registration of a transfer
of immovable property based on a progressive scale.
• The transfer and rental of land which is not a regulated The fee is BGN 1,530.50 plus 0.1% of the value of the
estate (as defined under the Supplementary Provisions property for properties with a value exceeding BGN
of the Spatial Development Act). 500,000. This is capped at a maximum of BGN 6.000.
• The transfer of buildings which are not new (i.e. new There is a minimum fee of BGN 30 for transfers with a
buildings are defined as those within sixty months of value of up to BGN 100.
obtaining permission for use or buildings which are
still under construction”). There are no significant stamp duties.
• The renting of a building or part of it to a tenant for • There have been discussions regarding potential tax
residential purposes. increases including increasing the VAT rate from 20%
to 22%.
Tax deductible expenses include tax depreciation and
some other expenses, such as operational costs,
maintenance and repair expenses.
Interest, foreign exchange losses and other financial

expenses incurred on capital and on loans that are
regarded as “thin capital” are not tax deductible. If the
ratio of the borrowings from shareholders or from persons
related to the shareholders exceeds three times the
shareholders’ equity in the borrower at any time within
the relevant year, the excess proportion of the borrowing
will be considered as thin capital, with a consequent
reduction in the level of interest relief available.
42
Croatia Real estate transfer tax of 5% of the market value of

the property is payable on the part of price which was
Contact: Jeni Krsticević not a “qualifying asset” for VAT purposes for the seller
jeni.krsticevic@bdo.hr (typically the value of land and utilities, or full value if the
+ 358 (1) 2395 741 property was built before 1998 or the seller is not VAT
registered).
Income from real estate realised by companies in Croatia
is subject to corporate tax at a rate of 20%. VAT at 23% should be paid on the remaining part of
the purchase price. If a buyer is VAT registered, it can
Losses can be carried forward for utilisation in future generally reclaim any VAT suffered at the end of the next
periods, up to a maximum of five tax years. The tax year VAT period (usually one month).
in Croatia is generally the calendar year, but it is possible
to agree a different period end with the Croatian tax No capital duties are payable in Croatia upon the issue
authorities. A tax return must be submitted to the Croatian of shares.
tax authorities within four months of the business year
end (generally by 30 April following the relevant calendar In order to encourage reconstruction and development
year). of certain areas, the Government of Croatia may issue a
decree, whereby certain taxpayers are exempt from tax,
Since 2005 there has been no withholding tax on or their tax rate is reduced. Benefits can include:
dividends, only the so-called “crisis tax” of 4% from
August 2009. • Accelerated depreciation is allowed for tax purposes
• Reduced profits tax, depending on the level of local
Personal income tax rates until July 2010 ranged from investment and number of employees can result in a
15% to 45%. From 1 July tax rates have reduced to a 0%, 3%, 7% or 10% tax rate
range of between 12% and 40%. • Tax free zones, e.g. the Vukovar-Srijem county is fully
exempt from profits tax for the period from 2005 to
Value added tax in Croatia from 1 August 2009 is 23%. 2014
Taxable profit is the accounting profit adjusted for non • Other tax favoured zones benefit from the reduced
deductible and non taxable items in accordance with the rates of 10% or 0%
provisions of Croatian company and tax law. • Regions under special government protection enjoy
reduced rates of 15%, 5% or 0%
Transfer pricing rules apply in Croatia, with the effect that
all payments to connected parties must be “arm’s length”
in order to be deductible and all charges from abroad are
subject to Foreign Currency Inspectorate scrutiny.
A debt:equity ratio of 4:1 will generally be allowed in

relation to interest on loans from shareholders with a
shareholding of 25% or more, or at least 25% of the
voting power. A third party loan which is guaranteed by
a shareholder will be deemed to have been made by that
shareholder for this purpose.
For tax purposes, depreciation is calculated on a straight-

line basis. The ordinary rate for buildings is 5%, but it may
be doubled to 10% in certain circumstances. Most other
relevant assets are depreciated at 20%.
Capital gains on disposals of property located in Croatia

are included in taxable income and subject to corporation
tax at 20%.The book value of property (i.e. the tax
depreciated value) is treated as the cost for the purposes
of the gain calculation.
The disposal of shares in a real estate company held by a

non-resident with no permanent establishment in Croatia
is exempt from tax.
43
Cyprus As a general rule the renting of real estate is exempt
from VAT, so any VAT charged on costs and services can
Contact: Karlos Zangoulos not be reclaimed and is a cost to the business. Similarly
kzangoulos@bdo.com.cy VAT incurred on the acquisition or construction of rental
+ 357 22 496000 property can not be reclaimed. The rate of VAT in Cyprus
is 15%.
Cyprus resident companies are subject to income tax
at the rate of 10% on their worldwide income. Non- Transfer fees are calculated on the purchase value of the
resident companies are taxed on Cyprus-source income land interest acquired. This applies to individuals and
only. Interest, repairs and maintenance costs and other companies at the following rates:-
expenses incurred wholly in respect of the rental business
are generally allowed as deductions against income. Up to €85,430 3%
€85,431-€170,860 5%
Individuals are subject to income tax on their rental Over €170,860 8%
income after deduction of interest, capital allowances
and an amount of 20% in lieu of expenses. Personal • As a member of the EU, Cyprus has signed the three
allowances are granted to non-resident individuals owning main EU tax directives. However, they are of limited
real estate who pay taxation according to the normal tax application as there are no withholding taxes on
bands and tax rates. Where property is jointly owned, interest or dividends under Cypriot domestic tax law.
personal allowances are granted to both owners. Joint
ownership of Cypriot property by non-resident couples is
therefore common.
A special defence tax is payable at an effective rate of

2.25% of the gross annual rental income by all commercial
property owners.
There are no withholding taxes on dividends paid abroad.

Consequently, Cyprus entities are commonly used by
non-resident persons as vehicles through which to own
Cypriot (and foreign) property.
Capital allowances in respect of Cypriot property are

calculated at the rate of 3% of the original cost of
construction of the property, except for hotels and
industrial buildings where the rate is 4%. This is computed
on a straight line basis. In the event that the building is
sold or otherwise transferred to a new owner, the new
owner is entitled to claim the unexhausted balance of the
original cost over the remaining life of the building. The
purchase price is therefore not relevant in the calculation
of capital allowances for second and subsequent owners.
Capital gains tax is payable on a disposal of Cyprus

property or shares in certain Cyprus property-owning
entities at the 20% rate, after deducting indexation
allowance (calculated using the official rate of inflation)
and adding back any writing down allowances previously
claimed. Individuals are allowed a one off tax free
allowance (currently €17,086) in respect of capital gains.
Where the property has been the owner’s main residence
for a period of more than five years then this allowance
is increased (currently to €85,430). Where a company
or individual engages in frequent transactions, or where
the property was held for a short time, the profit may be
regarded as being of “trading nature” and may be subject
to income tax rather than capital gains tax.
44
Czech Republic The acquisition of Czech real estate is subject to Real

Estate Transfer Tax (“RETT”) at a rate of 3% upon the
Contact: Jaroslava Steimarova higher of the purchase price and the market value.
jaroslava.steimarova@bdo.cz
+ 420 241 046 246 Property development companies are typically exempt
from RETT, as the first transfer of real estate is always
Real estate investments are most commonly made via a exempt.
Czech resident company (e.g. common corporate entities
or professional investment funds). They may also be Real estate tax varies from CZK 1 to CZK 10 per square
made through branches of foreign companies. metre, depending on the type of building structure and
its location.
Profits are taxable in the Czech Republic at the general
flat corporate income tax rate of 19% for 2010 applicable No capital duty is paid in the Czech Republic on the issue
for common corporate entities. A rise to 20% in 2011 of shares.
may be possible. For investment funds, unit funds and
pension funds the corporate income tax rate is reduced • The Czech Republic has fully adopted the various
to 5 %. EU Directives (e.g. the Parent Subsidiary Directive,
the Interest and Royalties Directive and the Mergers
Taxable income is generally computed on the basis Directive).
of standard accounting principles, and generally any
expenses incurred for the purpose of the property
rental business are deductible. Please note that Czech
accounting standards have to be used in order to
determine the corporate income tax. If an entity uses
IFRS or other accounting standards, it has to make
adjustments to reflect Czech accounting standards in
order to properly determine its corporate income tax
liability.
Interest paid to connected parties is allowable to the

extent that the interest is calculated at a commercially
supportable market rate and the thin capitalisation
restrictions are satisfied. The allowable debt-to-equity
ratio for loans to a property company from a related party
is 4:1.

deductible. The allowable rates vary between 1.02 %
and 3.40 % for straight line depreciation and run for a
period of either thirty or fifty years, depending on the type
of real estate. The reducing balance method of calculating
tax depreciation is also possible in certain circumstances.
Capital gains of any corporate entity from the sale of

Czech property (e.g. real estate and shares in Czech
corporate entities) are included within the general tax
base and liable to corporate income tax at the 19 % rate.
For non-resident investors in Czech real estate a relevant

double taxation treaty concluded by the Czech Republic
may prohibit the Czech tax authorities from taxing such
capital gains.
VAT on residential buildings for social living is 10%. For

other buildings the rate is 20%. It is payable on acquisition
of the property, if it is acquired within three years of the
date of construction.
45
Denmark Industrial buildings and office buildings adjacent to them
qualify for tax depreciation of up to 4% per annum of
Contact: Hans-Henrik Nilausen the acquisition price. Residential properties cannot be
hhn@bdo.dk depreciated for tax purposes. Land also may not be
+ 45 39 15 5320 depreciated for tax purposes.
Real estate investments can be made directly by either Plant and machinery may be depreciated at up to 25%
non-resident companies, individuals, or indirectly via a using the reducing balance method.
Danish company.
Capital gains are taxed at 25% for companies and up
Companies with taxable income from letting real estate to 59% (51.5% from 2010) for individuals. All gains
are taxed at the corporate tax rate of 25%. There are are taxable, but losses are only allowable if the building
progressive rates of up to 51.5% for individuals. qualifies for tax depreciation (i.e. industrial buildings or
adjacent office buildings). On sale, the tax depreciation
There is no wealth tax in Denmark. However, an annual is “clawed back” in full up to the level of the disposal
land tax has to be paid to the local administration. This proceeds.
tax varies from 1% and 3% of the official valuation of
the land. The provisions of Denmark’s double tax treaties generally
give Denmark the right to tax gains on the disposal of
Generally, taxable rental income is calculated on normal Danish real estate irrespective of where the vendor is
accounting principles but certain special rules apply. resident.
In most cases any expenses incurred for the purpose The acquisition of Danish real estate is not subject to
of the rental business are deductible. Interest paid to stamp duty. However, a registration fee is payable. This
connected parties is allowable to the extent that the registration fee is calculated as a fixed amount of DKK
interest is calculated at a commercial market rate and thin 1,400 plus 0.6% of the purchase price.
capitalisation (debt to equity) restrictions are satisfied.
The standard rate of VAT in Denmark is 25%. As a general
The allowable debt/equity ratio in respect of connected rule, neither the acquisition nor the renting of real estate
party debt is generally 4:1. Where the ratio of 4:1 is is subject to VAT. However, it is possible to apply for a
exceeded, an interest deduction may be denied on voluntary VAT registration which will be beneficial in some
that part of the controlled debt that should have been circumstances. This is not possible for most residential
converted into equity in order to observe the 4:1 debt buildings.
equity ratio. However, the thin capitalisation rules do not
apply if the creditor is an individual, if the connected party As a part of the recent Danish tax reforms, VAT exemption
debt is DKK 10 million or less, or if the taxpayer can prove on management and sale of real estate is abolished
that a similar financing could have been obtained from a in some situations. From 1 January 2011, the VAT
third party lender. exemption for enterprises receiving management fees
for management services on real estate is abolished, and
In addition to the thin capitalisation rules, there are two the management services will be subject to VAT. Also
further rules restricting interest deductions:- from 1 January 2011, the following are no longer exempt
from VAT:
• interest may only be deducted up to an average – sale of new buildings with or without land;
interest return (5% in 2010) on the tax value of the – sale of building sides, irrespective of whether they are
company’s qualified working assets (roughly fixed developed or not; and,
assets other than investments, plus stock). Excess – separate sale of built-up sites.
interest restricted under this rule is lost.
• interest expenses can only be deducted up to a No capital duty is payable in Denmark on the issue of
maximum of 80% of the company’s Earnings Before shares.
Interest and Taxation (EBIT). To the extent that interest
is restricted under this rule it may be carried forward to • It should be noted that although recent legislation has
future periods. However, the total interest deduction introduced amendments to the corporate tax regime,
is again subject to this restriction. from 1 January 2010 the withholding tax reduction
from 28% to 27% on dividends will not be effective
until 1 January 2012.
These two rules apply to all interest and not just that on
connected party debt. However, there is a de minimis
limit of DKK 21.3 million of interest, below which these
rules cannot reduce the allowable interest.
46
Estonia The standard rate of VAT in Estonia is 20%. A sale of

immovable property is usually tax exempt (without
Contact: Urmas Võimre the right of deduction of input VAT). There are some
urmas.võimre@bdo.ee exceptions to this rule:
+ 372 627 5500 1) Sale of immovable property which has not been in use
(new buildings) is subject to VAT;
Estonia charges tax on the income of companies and
permanent establishments only when their real estate 2) Renovated immovable property is also subject to VAT.
income and capital gains are distributed or are deemed to Renovation means that cost of renovation is at least
be distributed. The rate of withholding tax is 21%. 110% compared to purchase price of immovable
property;
Non-residents are taxed on income from Estonian
3) Plots of land without buildings on that where the
property businesses at a flat rate of 21%.
permit to erect building has been issued are also
subject to VAT;
No additional withholding tax is deducted on dividends
paid to non-resident companies or individuals. 4) Sale of securities which give the holder thereof a
right of ownership or disposal of immovable property
Withholding tax of 21% is applied to interest (including mentioned in points 1 and 2, 3.
interest upon debt secured on real estate) only to the
extent that it exceeds an ‘arm’s length basis’. Stamp duty is payable on the acquisition of real estate at
variable rates, but may not exceed EEK 40,000.
Estonia has a tax treaty network by way of which the
applicable withholding tax rate could be reduced. • Since the recent credit quake the proposed lowering
of tax rates on a yearly basis has been abandoned.
Deductions against rental income are not allowed for
individuals except if the individual registers with the tax
authorities as a “sole proprietor carrying on a business”.
Such an individual real estate owner has to pay income
tax at 21% and social security contributions at a rate
of 33% on their net profit. Social security contributions
are deductible for income tax purposes and no further
contributions are due on income exceeding EEK 783,000.
Where the individual in receipt of rental income is not a

registered sole proprietor, they are taxed on their gross
rental income at the rate of 21% (by way of withholding).
Deductions are not relevant to Estonian companies due

to the distribution basis of calculating taxable profits, as
described above.
There are no tax depreciation rules due to the distribution

basis of taxation in Estonia.
Non-residents pay income tax of 21% on capital gains

made from the disposal of real estate or rights over real
estate located or registered in Estonia.
Where a non-resident disposes of shares in an Estonian

company, more than 50% of the value of which is
comprised directly or indirectly of buildings or land
situated in Estonia, and, at the time of disposal, that
non-resident had a shareholding of at least 10% in
the company, the gain is subject to 21% income tax.
Otherwise, gains on the disposal of property company
shares are generally only taxable in accordance with the
tax laws of the country of residence of seller
47
Finland proportion of the VAT reclaimed on the development on a
time apportioned basis.
Contact: Heikki Muikku
heikki.muikku@bdo.fi Property tax is charged annually at rates varying between
+ 358 207 432 928 0.32% and 3% (depending on the municipality where
the property is located and on the nature of the property)
A property company incorporated in Finland is subject to based on the value of the property which must be
Finnish corporate tax on its worldwide profits and gains. determined by a fixed formula. Farming land and forests
Foreign property companies that own property in Finland are exempt. These rules are the same regardless of
are subject to tax on all income from that property. whether or not the taxpayer is a resident of Finland.
Profits are taxable in Finland at a flat corporate tax rate
of 26%. Taxable profit is determined in accordance with The purchase of Finnish land is subject to real estate
generally accepted accounting principles with only minor transfer tax at 4% on the purchase price. Generally,
adjustments for tax purposes. the purchase of shares in a Finnish company that holds
property outside of its main trade is subject to transfer
A company’s income from “non-business” activities tax at 1.6% on the share price (only if either the seller
(e.g. rental income) is regarded as “personal income”. or purchaser is resident in Finland). However, if the
Profits and losses from business (i.e. trade) and non- purchased shares relate to a “real estate company”
business sources are treated separately for tax purposes. then transfer tax is levied, even if both parties to the
Consequently, losses from one source cannot be offset transaction are non-residents.
against income from the other source.
• Finland introduced a REIT regime in April 2009. The
The expenses incurred in acquiring or maintaining a target of the regime is to promote the supply of rental
business are deductible and are accounted for on an apartments and for this reason the new rulings are
accruals basis. Expenses that generate income over a applicable only to companies whose assets comprise
period of at least three years are divided equally across at least 80% rented apartments.
the corresponding tax years.
Costs in connection with acquiring fixed assets are

deductible as depreciation. The depreciation of buildings
and other structures is computed on the total value of
the structure using the declining balance method for
each building separately, with a maximum rate varying
from 4% up to 25% depending on the type of building
or structure.
Capital gains realised on the sale of Finnish real estate

will normally be taxed at the standard corporation tax rate
of 26% if the owner is a corporation, or at 28 %, if the
owner is an individual.
Subject to the provisions of any double tax treaty, gains

realised by a non-resident company on the disposal of
shares in a Finnish real estate company will, in certain
cases, be subject to corporation tax in Finland.
The standard rate of VAT has increased from 22% to 23%

on 1 July 2010. Property rental payments are generally
VAT exempt. However, a landlord or real estate company
may register voluntarily for VAT, provided the lessee is
using the property for VATable activities, or is the Finnish
Government.
Sale of real estate is VAT exempt but if real estate is sold

to a non-taxable person less than ten years (in some
cases five years) from the beginning of the calendar
year during which new or major construction work on
the property was finalised, the seller is liable to repay a
48
France The taxable gain on the direct disposal of a property

(usually the difference between the sale price and the net
Contact: Carine Duchemin book value) is taxed at the standard corporate tax rate.
cduchemin@djp-avocats-bdo.fr
+ 33 (0)1 80 18 10 80 Subject to any double tax treaty in place, a disposal of
property (or shares in a property holding company) by a
Income from, and capital gains realised on the sale of, non-resident company would be subject to withholding
real estate in France are taxable in France, whether or tax at a rate of 33.3%, or 50% if the non-resident
not received by a French resident (subject to any relevant company is established in a non-cooperative country,
double tax treaty). essentially tax havens.
A French company is subject to corporate tax. The VAT and registration duty are payable on the acquisition
standard rate of corporate tax is 33.33%. of real estate.
A permanent establishment may give rise to branch tax, From 2010, the sale by a VAT liable person operating
payable at a rate of up to 25% on the net after tax profit in a property development business that sells land and
of the branch. There are some exemptions available from buildings within five years of the building’s completion are
branch tax (which in any case does not apply within the subject to VAT on the sale price or, in some circumstances,
EU). on the margin, at a rate of 19.6%. In general sales are
also subject to registration duty at the rate of 0.715%
An investment through a partnership, which has not (unless the VAT has been calculated on a margin basis).
elected to be liable to corporate tax, gives rise to a tax
charge at the entity level, but which is payable by the The other sales of land and buildings by a VAT liable
partners. person can be subject to VAT at its option. In all cases
the registration duty will be due at the rate of 5.09%.
Generally, any expenses incurred for the purpose of the It is calculated on the purchase price, plus any other
rental business are tax deductible - including local taxes consideration provided.
and registration duty.
Registration duty is tax deductible for French companies
Interest paid to connected parties is allowable to the or branches.
extent that the interest is calculated at a commercial
market rate and thin capitalisation restrictions are The acquisition of shares in a French real estate company
satisfied. is subject to the same treatment as the direct acquisition
of a building.
Interest payments that fail all three of the following
conditions may be restricted:- A nominal duty (€375/€500) is payable in France on the
issue of shares.
• the debt:equity ratio exceeds 1.5:1
• the interest cover is below 4 to 1 • France has a well established Real Estate Investment
Trust regime (SIIC). Under this regime, companies
• interest payments by the relevant company to related whose main activity is the leasing of properties, which
companies are greater than interest payments received have a share capital at least equal to €15m and are
from related parties. listed on a French regulated market, can elect for
the regime. Provided certain conditions are met, SIIC
However, if the excessive interest payments are less companies are exempt from corporate tax on both
than €150,000 then all of the interest payable should be their rental income and any capital gains that arise
allowable under the thin capitalisation rules. on the sale of their properties or shares in qualifying
subsidiaries.
deductible. The allowable rates for real estate range from
2% to 5%. Certain specified assets may be depreciated
using accelerated depreciation methods.
Plant and machinery depreciation is allowable at rates

depending on the respective standardised useful life. On
sale, the tax depreciation is “clawed back” up to the level
of the disposal proceeds.
49
Germany Depreciation in respect of buildings, but not land, is tax
deductible. The allowable rate varies between 2% and
Contact: Martina Elisabeth Luetticken 3%. In the case of an exceptionally short useful life of the
martinaelisabeth.luetticken@bdo.de building higher rates apply.
+ 49 (040) 30 29 3 - 263
Plant and machinery depreciation is allowable at rates
Real estate investments are most commonly made depending on the respective standardised useful life. On
by way of either non-resident companies or German sale, the tax depreciation is “clawed back” up to the level
partnerships. of the disposal proceeds.
Corporate entities are subject to corporate income tax Generally, neither the acquisition nor the renting of real
at an effective rate of 15.825%. Individuals investing estate is subject to VAT. However, an option to tax may
either directly or by way of German partnerships are be possible. In this case it is important to make sure
taxed at their individual tax rate. A German company is, that the investor is entitled to input tax deductions. If the
in principle, also subject to trade tax, which is a local tax property is rented out, an option to tax is possible only
at rates varying from 7.00% to 17.15%. Trade tax is not if the lessee uses the property exclusively for VATable
deductible for corporate income tax purposes. “Passive” activities. Thus, an option is generally not possible for
rental income is, however, often exempt from trade tax. renting out residential buildings.
Non-residents are not liable to trade tax providing they The acquisition of German real estate is subject to Real
do not have a permanent establishment in Germany. Estate Transfer Tax (“RETT”) at a rate of 3.5% or 4.5%
Accordingly, it is generally “safer” for trade tax purposes of the purchase price, depending on the location of the
for investment in Germany to be structured through non- property.
resident corporations that are tax resident in jurisdictions
which offer treaty protection and do not charge tax on the Generally, RETT also applies on the acquisition of shares
German rental income. in a company or interest in a partnership owning German
property, but the tax base (the standard assessed value)
Generally, taxable income is calculated on normal may often be lower than the fair market value of the
accountancy principles. Until 2008, a non-German property.
resident with only passive income (e.g. rental income)
calculated its taxable rental income on a cash receipts and In asset deals RETT is added to the tax base of the
disbursements method mainly adjusted by a deduction property and can be tax deductible as depreciation.
for depreciation. From 2009 the rental income of a non- Where shares in a corporation are acquired RETT is part
resident corporation is deemed for calculation purposes of the acquisition costs of the shares and not deductible
to be trading income. As a result, its taxable income has as depreciation.
to be determined under normal accounting principles,
subject to prior notification by the tax authorities. Such • German stock corporations may elect to convert to
a notice can be issued if the corporation has an annual German REIT status. Subject to meeting a number
turnover in excess of €500k per calendar year or if the of conditions, qualifying rental profits in a German
profit per business exceeds €50k per business year. The REIT will be exempt from corporate income tax, the
requirement to calculate rental income under normal solidarity surcharge and municipal trade tax. Profit
accounting principles will then have to be fulfilled from the distributions are subject to full taxation on the level
beginning of the fiscal year following the notification. A of the shareholder, for corporate shareholders e.g.
non-resident corporation that has determined its income participation exemptions do not apply.
on a cash and disbursement basis may elect to change to • No capital duty is paid in Germany on the issue of
the new method of calculating its rental income from the shares.
beginning of a tax year. • From 1 January 2010, certain group reorganisations
may no longer trigger a RETT charge.
Generally, any expenses incurred for the purpose of a
rental business are deductible.
Interest paid to connected parties is allowable to the

extent that the interest is calculated at a commercial
market rate. Under the rules on interest deduction
limitation, net interest paid is only deductible up to 30%
of earnings before interest, taxes and depreciation, unless
the aggregate of net interest paid is below €3 million.
50
Greece The acquisition of Greek real estate is subject to Real

Estate Transaction Duty (“REDT”) at a rate of 1% of the
Contact: Marios Eleftheriadis purchase price. The REDT is due before the sale and
m.eleftheriadis@bdo.com.gr purchase is completed.
+ 30 6944 677 903
The aforementioned tax applies to both individuals and
Companies tax resident or with a permanent establishment companies.
in Greece pay corporation tax at a rate of 24% on their tax
adjusted profits. The rate will be reduced by 1% each Also, real estate is subject to an annual Real Estate Tax
year until it is finally set at 20% in 2014. (“ETAK”) at 0.6%
Non-resident companies are also obliged to maintain An annual Local Real Estate Duty (TAP) is payable to local
accounting records in Greece, if they own property authorities. The amount payable is based on the value of
located in Greece. the real estate and varies between 0.025% and 0.035%
on the assessed value of the property.
Rental income is subject to a surtax of between 1.5%
and 3%, depending on the circumstances of each case. On 1 July 2010, the standard rate of VAT was increased
from 21% to 23%.
Foreign companies, established in countries regarded
as tax havens are subject to an annual 3% property tax A capital duty of 1.1% is due on the issue of shares.
(quantified by reference to the value of the property
owned). A transfer tax of 5% is due by corporate entities on the
transfer of non-listed shares.
Individuals are also subject to tax in Greece on their
rental income in a similar fashion to companies, albeit at • The taxation of real estate in Greece and, in particular,
progressive income tax rates of up to 45%. the taxes levied on the transfer of the ownership of
such property is currently going through a phase of
In arriving at taxable income, resident companies can transformation, the previously levied Real Estate
generally deduct the costs and expenses (including Conveyance Tax being gradually replaced by Value
depreciation and finance charges) accrued in generating Added Tax. Because the transitional arrangements
rental income. are fairly complex, investors are advised to seek
and secure competent professional advice prior to a
Depreciation is tax deductible for corporate entities at transaction.
rates of between 2% and 12%, depending on the type
of property. However, for the first three years, newly
established entities either may not deduct depreciation,
or in certain circumstances they may be allowed to
deduct 50% of the depreciation that would otherwise be
deductible.
All corporate profits and gains are treated equally and are
taxed at the standard rate of 24%.
For individuals, profits on the sale of real estate are

subject to capital gains tax at the following rates:-
• 20% if the real estate has been held for less than five
years.
• 10% if the real estate has been held for between five
and fifteen years.
• 5% if the real estate has been held for fifteen to
twenty five years.
• No capital gains tax is due if a real estate asset has
been held for more than twenty five years.
Capital gains tax due on the sale of a property must be

paid to the tax authorities before the sale is completed.
51
Hungary is currently 5% per annum. However, depreciation of long
life structures, including certain buildings, is restricted to
Contact: László Pásztor 2%.
laszlo.pasztor@bdo.hu
+ 36 1 235 3010 The gain on a disposal of property by a Hungarian
company is added to its taxable rental profits.
Most real estate investment is structured through
resident entities (whether a company or branch), as direct The gain on a disposal of shares in a property owning
non-resident property investment requires permission company by a Hungarian holding company would similarly
from the relevant regional authority. The most common be added to its taxable profits.
entity for real estate investment is a private limited
liability company. However, partnerships can also be From 1 January 2010, the capital gains of a foreign
good vehicles for certain classes of investor. company from the sale of the shares of a company
owning Hungarian real estate are subject to the general
Companies resident in Hungary are currently subject to rate of corporate income tax of 19%. This liability applies,
general corporate income tax at a rate of 19%. Prior to if the foreign company is resident in a country with which
1 July 2010, the first HUF 50 million was taxable at a Hungary has no double tax treaty, or the existing treaty
rate of 10% (provided certain conditions are met – e.g. allows Hungary to tax such income.
having at least one employee in the tax year). From 1 July
2010, the taxable base on which the 10% rate applies The local business tax rate levied on the net turnover
has been increased to HUF 500 million per tax year, and minus modification items is capped at 2% by law, but
the conditions mentioned above are cancelled. The HUF varies depending on the municipality in which the
500 million tax base shall be applied proportionally for the company/branch is located. Taxable income is based
second half of 2010. (i.e. in the second half of 2010 it is on financial statements prepared in accordance with
applicable for HUF 250 million) The 4% solidarity tax has Hungarian accounting standards.
been cancelled from 2010.
From 1 January 2010, the acquisition of property and land
If the taxable profits calculated according to the general (commercial or dwelling) is subject to a transfer tax at a
rules are less than 2% of total revenues minus certain general rate of 4%. Above a value of HUF 1 billion the tax
costs, special tax base rules apply. rate is 2%, with the maximum tax amount at HUF 200
million.
Generally, business expenses are deductible for corporate
income tax purposes. Losses can now be carried forward From 1 January 2010, the acquisition of the shares of
for an indefinite period. From 2010, no approval is needed a company possessing Hungarian real estate is subject
from the Hungarian tax authorities for losses incurred by to the general rate of transfer tax, if the new owner
commercial business activities. Tax loss carry-back is not acquires at least 75% of the shares of the company
possible, except for certain agricultural activities. possessing the real estate, either directly or indirectly.
The subject of the transfer tax is the value of the real
From 1 January 2010, interest, royalty and service fees estate proportionate to the shares acquired. According
paid to a foreign company resident in a country with to the mid-year modification of the transfer tax law, this
which Hungary has no double tax treaty is subject to transfer tax liability is not applicable if the transfer is made
30% withholding tax. Services such as business and between affiliated companies.
management consultancy, advertising and market
research, public opinion polling, and for agency activities A preferential transfer tax rate of 2% is available if a real
are subject to this WHT. estate fund or real estate leasing company (financial
lessor) purchases the property. A condition for applying
Transfer pricing rules apply for all affiliated party the preferential rate for a real estate developer is that the
transactions and transfer pricing documentation must be property shall be sold within two years. Real estate funds
prepared in order to support the applied price/interest/fee and financial leasing companies do not have any fixed
as being a commercial market price. holding period limitations.
If the prescribed debt: equity ratio of 3:1 is exceeded, • There is stamp duty of HUF 100k on the establishment
the interest on the excess is not deductible. These thin of a limited liability company (called “Kft” in Hungary),
capitalisation rules apply both to connected party debt HUF 600k for a public/private limited liability company
and third party debt (but not to bank debt). by shares (called “Zrt” or “Nyrt” in Hungary) and
HUF 50,000 for partnerships (called “Bt” in Hungary).
Depreciation is deductible at set rates as defined in the There is a simplified registration, for which the stamp
Corporate Income Tax Act. For leased real estate the rate duty is HUF 15k for all types of companies.
52
Ireland the sale of land or property will be subject to Irish capital

gains tax at the rate of 25%. In computing the amount of
Contact: Mark Hynes the gain, the original cost will be indexed to take account
mhynes@bdosx.ie of inflation up to 31 December 2002. Indexation ceased
+ 353 1 4700 271 after that date.
Irish corporate entities are subject to corporation tax Ireland always has the primary taxing rights in respect
of 25% on rental income. Furthermore, closely held of income or gains on land or property situated in the
companies may be liable to a 20% surcharge on rental Republic of Ireland. Where the owner is resident in a
income that is not distributed to shareholders within tax treaty country, relief will generally be available in the
eighteen months of the end of the accounting period. country of residence for any tax paid in Ireland.
Non-resident corporate entities are similarly subject to Irish VAT law in respect of the supply of property has
corporation tax of 25% on rental income from Irish real undergone fundamental changes effective from 1 July
estate provided the property is owned or used by, or held 2008 (subject to certain transitional measures).
by or for, a branch or agency situate in Ireland. Otherwise,
a non-resident corporate entity is liable to income tax on Commercial lettings are now VAT exempt, with an option
rental income at 20%. to tax available. However, subject to certain conditions,
this option to tax is restricted where the landlord is
The tax rates for non resident individuals depend on the connected with the tenant.
level of income in Ireland. If total taxable income is less
than €36,400 tax will be payable at 20%. For income in Sales of commercial property are VAT exempt if the
excess of this amount, the rate is 41%. An additional property is more than five years old or, if less than
income levy is payable by individuals on their taxable five years old, has been occupied for more than two
income from the tax year 2009 onwards. For the tax year years. However, there is a joint option to tax available
2010 the income levy varies from 2% to 6%. between the purchaser and vendor. This option may be
advantageous for the vendor where it has claimed a VAT
Generally any expenses properly incurred for the purpose input credit on the original purchase/development of the
of the rental business are deductible. However certain property.
specific expenses are disallowed, such as tenant
entertaining. There is stamp duty payable on the purchase of land or
property. If acquiring commercial property, the rate of
Capital expenses, such as expenditure enhancing the stamp duty will be between 0% (value less than €10k)
value of the property or legal fees on the acquisition and 6% (value exceeds €80k).
of the property, are not available for deduction against
rental income. Instead, these costs are allowable when The rate of stamp duty can often be reduced to 1% by
calculating any capital gains tax on the eventual disposal acquiring shares in a company owning the land.
of the property.
No capital duty is payable in Ireland on the issue of shares.
For commercial property, the interest on borrowings With the exception of a nominal €200 annual levy on
is deductible against rental income. There are no thin investment properties, there are no annual or other
capitalisation rules in Ireland. wealth taxes if a non-resident owns land in Ireland.
Tax depreciation in respect of freehold buildings is • A number of double tax treaties have been agreed
allowed on certain property assets. These include in recent months (including revisions to existing
investment in childcare facilities, private hospitals and agreements) which may facilitate certain cross-border
private nursing homes. However, a number of these real estate transactions.
measures terminated as of 31 December 2009.
New industrial buildings qualify for allowances calculated

at 4% per annum on a straight line basis. Second hand
buildings are generally depreciated over their deemed
remaining tax life. The tax life of a new industrial
building is generally treated as twenty five years. Capital
allowances on plant & machinery are calculated at a rate
of 12.5% per annum.
Any gain (including those by non Irish residents) arising on
53
Italy For individuals, capital gains arising from the disposal of
real estate investments (with the exclusion of building
Contact: Attilio Torracca land) are subject to income tax only if the sale takes place
a.torracca@studiosala.com within five years from the purchase or construction of the
+ 39 02 76018118 real-estate. This rule is applicable both to resident and
non resident individuals.
Italian resident companies and permanent establishments
are subject to corporate income tax (IRES) at a rate of The Budget law for 2010 allows individuals to step up
27.5%. the basis of land owned on 1 January 2010, by payment
of a substitutive tax at the rate of 4%; the updated value
They are also subject to a regional tax (IRAP) at a fixed will have had to have been certified by an expert’s sworn
rate of 3.9% (or for some regions of Italy 4.82%) on appraisal by 31 October 2010.
rental income. Neither interest paid nor payroll costs are
deductible for IRAP purposes. Sales of commercial buildings by local companies or
permanent establishments are subject to VAT at 20%
Losses can normally be carried forward for five years and (10% in the case of renovated properties) only if (i) the
deducted from future profits for IRES purposes. seller is a construction company or (ii) the buyer is subject
to VAT with a limited right to reclaim VAT, the percentage
For individuals, income derived from real property situated reclaimable being 25% or less (e.g. banks and insurance
in Italy is included in taxable income and is subject to companies) or (iii) the seller expressly opts in the public
personal income tax (IRPEF). Resident and non resident deed of sale for the VAT regime to apply.
individuals are taxed on their Italian source income at
progressive rates from 23% to 43%. If VAT does not apply sales are subject to registration tax
(at a rate ranging from 3% to 15%), mortgage tax (2%)
Italy’s regions and the local authorities within each region and cadastral tax (1%).
have the power to raise additional revenue by charging
persons liable to IRPEF and living in their particular area A local tax on real estate (ICI) is charged on an annual basis
an additional regional or local income tax. The regional at 0.4% to 0.7% of the cadastral value of the property.
tax is typically 0.9% and the local tax 0.5%. The rate is set by the relevant local authority. Typically,
the cadastral value is below, and sometimes substantially
Taxable income for IRES purposes is the net revenue below, the property’s market value. Property tax (ICI) is
after the deduction of costs, as shown in the annual not deductible for the purposes of IRES or IRAP.
profit and loss account. With some minor exceptions,
all costs relating to the activities of a company can be • Plans for tax simplification are unlikely to be introduced
deducted, including net interest payable up to an amount in 2010.
equal to 30% of EBITDA (not including depreciation and
finance lease payments). It is possible to carry forward
excess interest or surplus EBITDA. There is scope within
a domestic group of companies for excess interest or
EBITDA to be exchanged between companies.
For individuals, the rental received, less an arbitrary 15%

deduction, constitutes the taxable amount. No deduction
is allowed for actual expenditure, including loan interest.
All fixed assets (except land and residential buildings) are

depreciable for tax purposes. The depreciation rate for
buildings is typically 3%. The value of the land must be
segregated from the value of the buildings and it is not
depreciable. A specific rule applies to calculate the land
value (if it is not separately recognised in the financial
statements of the owner) being 20% of the total value
(increased to 30% for industrial buildings).
For companies, if real estate (other than residential

buildings) has been held for more than three years, the
taxation of any capital gain arising on sale can be deferred
over a maximum period of five years.
54
Latvia activities, including real estate letting businesses, for a

maximum of three years. Individuals cannot carry forward
Contact: Vita Liberte losses, which have arisen from the alienation of capital
vita.liberte@z-l.lv assets.
+ 371 2 646 9918
Tax depreciation is available at various rates, using the
reducing balance method. Buildings, structures and
If the real estate investment vehicle is a Latvian company,
perennial plantations may be depreciated at 10%. Most
that company will pay corporate income tax at 15%.
types of plant and machinery are tax-depreciable at 40%.
Individuals investing via a Latvian partnership will pay
Capital gains on the disposal of Latvian real estate are
personal income tax at a flat rate of 26%. If individuals
taxable for corporate income tax purposes. Capital gains
invest directly and there is no business activity
are computed by subtracting the book value of real
undertaken, a 15% capital gains tax will apply. Where
estate from the sale proceeds. There is no allowance
the individuals also undertake a business activity a 26%
for retail price inflation. A non-resident company with no
personal income tax will apply. Corporate partners in a
permanent establishment in Latvia, however, is subject
Latvian partnership will be liable to corporate income tax
to a 2% withholding tax on the sale proceeds.
at 15% on their profit share.
Capital gains made by resident individuals on the disposal
It is also possible to invest in Latvian real estate via a
of private real property are taxed at a rate of 15%. A
foreign or offshore entity, but income remittances may
withholding tax at a 2% rate of the sale proceeds applies
be subject to higher withholding tax.
to non-resident individuals selling their property to a
resident of Latvia. The standard rate of income tax of 26%
There is no withholding tax on rents paid to a non-resident
will apply, if it is considered that an individual performs an
individual of a tax treaty country but tax is payable at a
economic activity.
rate of 26% on the net income upon filing a tax return.
However, any remittances of income (including rents)
Individual income tax law provides criteria in order to
paid to a legal entity located in a deemed tax haven
identify, if an individual performs an economic activity (at
country are prima facie subject to withholding tax of 15%.
least one criteria to be observed):
If an individual is located in a tax haven country, then their
income is subject to a withholding tax at a rate of 26%. 1) systematic and regular transactions (3 and more during
The tax authorities will, however, waive the requirement taxation period or 5 and more during three taxation
to withhold tax if it is satisfied that the transaction did not periods);
have a tax-avoidance motive. 2) amount of transaction exceeds LVL 10 000, except
income from personal belongings;
Withholding taxes are also imposed at 5% on rental 3) Economic substance.
payments to a non-resident company without a
permanent establishment in Latvia. It must also be The disposal of shares in a company where more than
noted that non-resident companies that are members of 50% of its value directly or indirectly relates to Latvian
Latvian partnerships face a withholding tax of 15% on real property is treated as if it were a disposal of the
any remitted profit share, except where there is provision underlying real property, unless the shares are publicly
for a lower rate in a double tax treaty quoted on an EEA stock exchange.
In computing income for both corporate income tax In general, sale proceeds from real estate are not subject
and personal income tax purposes (if an individual is to VAT, except the first sale of unoccupied (unutilised) real
registered as self-employed), all expenses reasonably estate which is subject to the standard VAT rate of 21%.
connected with the real estate investment may be Rental income is subject to the standard VAT rate.
deducted including mortgage and other loan interest. For
corporate income tax purposes only, thin capitalisation Real estate tax of 1.5% per annum is levied on the
rules apply to limit deductible interest in certain cases. registered (cadastral) value of land, buildings and
Interest paid at rates above market rates may also be engineering structures used for business purposes. Real
restricted, but neither rule generally applies to interest estate tax of 3% applies on uncultivated agricultural land.
paid to Latvian or other EU credit institutions. Payments
to related parties are only allowed to the extent they are There is no capital duty upon the issue of shares in Latvia.
at an arm’s length.
• Special economic zones give companies entitlement to
Companies can carry forward losses for eight years. significant (up to 80 percent) corporate income tax and
Where control of a company (>50% of shares) changes, real estate tax reliefs. The effective tax rate in special
losses brought forward remain available, provided that economic zones is 5% upon specific conditions.
the business carried on in the prior two years continues
for at least five years after the change. • Withholding tax on qualifying interest payments will
be abolished by 1 July 2013 in line with the terms of
Individuals may carry forward losses from business the EU Interest and Royalties Directive.
55
Lithuania However, it is possible to file a tax return and be taxed at
the same rate applicable to net rent (i.e. 15%). Gains on
Contact: Živilė Veličkienė the disposal of shares by companies are generally taxable,
zivile.velickiene@bdo.lt but gains on disposals of holdings of 25% or more may
+ 370 37 32 03 90 be exempt under certain conditions. For example, if the
entity transferring the shares had more than 25% of the
Companies are charged to corporate income tax at a voting shares of the entity for at least two years without
standard rate of 15%. A permanent establishment of a a break.
foreign company is subject to the same rate of tax as a
resident company. For non-resident individuals, similar rules apply. Disposal
proceeds will be subject to withholding tax of 15%, but
Personal income tax (income tax on individuals) is the net gain will be taxable at the same rate if a tax return
currently charged at 15% on most types of income and is filed. The exemption for property held for three years or
at 20% (charged by withholding) on certain income, such more does not currently apply to non-residents. Having
as dividends (for residents and non-residents). retained the property for more than three years, the
sales income of that real estate is non-taxable. The same
Non-resident companies without a permanent rule is applied to non-residents. Gains on the disposal of
establishment in Lithuania are liable to a 15% withholding shares in Lithuanian companies by non-residents are not
tax on rental income from Lithuanian immovable property. generally taxable in Lithuania.
A 15% withholding tax applies to dividend payments Neither the acquisition of nor rental of real estate is
and a 10% rate applies to interest, subject to lower rates generally subject to VAT. An option to apply VAT may be
required by tax treaties or EU Directives. advantageous but once the option is exercised, it must
remain in place for twenty four months. The option to
Generally all expenses incurred in the usual course of apply VAT is available only for VAT payers, and choosing
business are deductible, subject to some exceptions. this option, all rental transactions with VAT payers will
have to be taxed with VAT.
However, rental income of individuals is subject to tax
at 15% on the gross rents, without any deductions. The Owners of real property, regardless of their residence
only exception is if the rental is part of a business, in status, are liable to land tax at rates of between 1.5%
which case the landlord, if registered as a sole proprietor and 4% on the acquisition price (the actual rates are set
carrying on a business, may opt for taxation at 15% on by local authorities).
net rents.
Corporate entities also pay an annual real property tax at
Losses generally may be carried forward. Transferred rates of between 0.3% and 1% on the cadastral value of
tax losses incurred due to disposal of securities and (or) the property. The precise rate varies between one local
derivative financial instruments may be reduced at taxable authority and another. Reliefs and reductions may be
income amount calculated only on disposal activities of available. The tax is deductible in computing income for
securities and (or) derivative financial instruments. There corporate tax purposes.
is a possibility to carry forward tax losses among group
companies. No capital duty is paid in Lithuania on the issue of shares.
There is also no stamp duty on the transfer of real
Land is not depreciable, but exceptionally, an impairment property.
write-down to market value may be made if the land has
fallen below acquisition cost. • Certain reliefs are available for investment in Lithuania’s
free economic zones.
Depreciation on buildings and other fixed assets is allowed
on either a straight-line or declining-balance method. The
straight-line method is the norm for commercial buildings.
Dwelling houses may be depreciated at 5% per annum
and other buildings at 6.67% per annum; some new
buildings qualify for depreciation at 12.5% per annum (all
on a straight-line basis).
Capital gains in Lithuania are taxable as ordinary income

at a 15% rate. For non-resident companies without a
permanent establishment, there is a withholding tax of
15% on the disposal proceeds of immovable property.
56
Luxembourg less deductible expenses. These expenses include

repairs and maintenance, interest and finance charges,
Contact: Guy Hornick property tax, insurance premiums, tax depreciation or, if
guy.hornick@bdo.lu certain conditions are fulfilled (notably the property was
+352 45 123 221 completed at least fifteen years ago) an allowable “lump
sum” expense. The “lump sum” expense is calculated
Real estate investments can be made directly by non- as the lower of €2,700 per year or 35% of gross annual
resident individuals, companies or indirectly via an rentals (but not exceeding €2,700). Interest costs can be
investment in a Luxembourg property company. considered additionally.
Personal income tax is levied on an individual’s income The allowable debt:equity ratio in respect of connected
arising from property located in Luxembourg. The tax party debt is 6:1. Interest payments are deductible within
rate is progressive, ranging between 0% and 38% plus a these thin capitalisation rules provided that the interest
2.5% surcharge on the income tax amount. It should be rate is set at a supportable market rate.
noted that tax losses on rental income are not available
for future offset. From 1 January 2011, the maximum Tax depreciation is allowed (on a straight line basis) on
tax rate for individuals will be 39%. There will also be the capital cost of buildings (but not land). The allowable
an increase in the unemployment surcharge to 4% and rate varies from 2% to 6%. The capital cost includes
6% for the part of the taxpayer’s incomes exceeding any registration duties, notary and architect fees. In the
€300,000. An additional 0.8% special crisis contribution absence of a supportable specified allocation, land is
will also be charged. assumed to be 20% of the total purchase price.
Real estate income arising within a Luxembourg The transfer of property is within the scope of VAT but
tax resident company is taxed on the same basis as is VAT exempt, unless an application (option) has been
commercial profits. made to apply VAT.
Real estate owning companies which are taxed on Similarly, the letting of property is a VAT exempt service,
commercial activities are subject to corporate income unless the real estate lessor opts for it to be taxable
tax at progressive rates to a top rate of 21% for profits which may, in certain circumstances, be beneficial.
(including capital gains) greater than €15,000, plus a 4%
surcharge on the corporate income tax amount (5% from Leases without VAT are subject to a registration duty
1 January 2011) resulting in a maximum effective tax rate of 0.6% (calculated on the sum of all rental payments
of 21.84%. (22.05% from 1 January 2011). provided for the contract).
In addition, a local municipal business tax of 3% of the From 1 January 2009 contributions of Luxembourg real
adjusted business profit plus a multiplier of between estate to corporations and partnerships are subject to a
200% and 300% depending on that local authority is new registration duty as follows:
applied. For example, in Luxembourg City, this gives
an effective rate of 6.75%. Accordingly, the maximum The transfer of property located in Luxembourg is subject
effective corporate tax rate is 28.59% in Luxembourg to a registration duty of 6% and a mortgage duty of 1%. In
City (28.8% in 2011). addition, in Luxembourg City itself, a municipal surcharge
of 50% is applied to registration duties, so that the overall
Revenues arising from a commercial activity through a transfer charge can amount to 10% for properties located
permanent establishment of a non-resident company in Luxembourg City.
are also taxed as commercial profits. This only applies
to non-resident companies that build properties with the The registration duty is calculated on the higher of the
sole intention of resale. In this case, losses are available purchase price (inclusive of VAT) and the market value.
for future offset.
• Luxembourg has a range of fund entities (i.e., UCIs, SIF
Rental income realised by a non-resident company does included) that are not subject to tax on their income but
not qualify as a commercial profit if the company has built instead on their equity (“taxe d’abonnement”). Fund
or bought properties without the sole intention of resale. entities are supervised by the Luxembourg Banking
Such companies are only subject to corporate income Supervisory Authority (CSSF).
tax at the rate of 21.84% (22.05% in 2011). Tax losses
on rental income in this case are not available for future
offset.
Taxable rental income is calculated as gross rental income
57
The Netherlands Anti-abuse rules have been introduced to counter
perceived tax avoidance relating to real estate
Contacts: Norbert Rosmalen depreciation. Where it can be demonstrated that the fair
market value of a building lies below the WOZ-value, then
norbert.rosmalen@bdo.nl depreciation to write the asset down to its fair market
+ 31 10 24 24 830 value is still possible. A transitional rule applies for real
estate that has not been depreciated for a period of three
The net rental income of both resident and non-resident years from 1 January 2007.
companies is subject to corporate tax at 20% for the first
€200,000 of profit and 25.5% for the excess. Plant and machinery within commercial real estate is
generally depreciated at a rate of between 5% and 10%,
A structure with a hybrid entity (e.g. CV or cooperative) again using the straight-line method. For other assets
is often considered to optimise debt financing / interest generally a minimum depreciation period of five years
deductions. Certain conditions have to be taken into applies.
account.
By decree (dated 10 December 2008) the rules for
Tax losses can be carried back to be offset against the accelerated (discretionary) depreciation have been
taxable profits of the previous year and can be carried relaxed in order to provide businesses with additional
forward for a period of nine years. A recent set of liquidity. These changes have effect as per 1 January
temporary fiscal incentive policies entail that, amongst 2009 and apply to ‘investments’ made during the
others, Dutch companies that have suffered losses in calendar year 2009 and 2010. The depreciation could be
2009 and 2010 could choose to carry back these losses as high as 50% in the year of investment (i.e. 2009 or
for a period of three years and to carry forward these 2010) of the acquisition/ production costs. The remaining
losses for a period of six years. amount could be depreciated in one or more following
years. The rule does apply to most business assets, with
Generally, taxable income is calculated upon normal some exceptions such as real estate, cars and intangible
accounting principles and any expenses incurred for the assets.
purpose of the rental business are deductible, although
certain expenses such as penalties and fines are not Both resident and non-resident companies are subject
deductible. Interest and capital gains (unless they can be to tax on capital gains realised upon the sale of Dutch
deferred) are included in taxable income. property, at the corporate tax rates. The gain equals the
difference between the sales proceeds and the fiscal (i.e.
Interest payable on loans from related parties is allowable tax depreciated) book value.
to the extent that the thin capitalisation rules are satisfied.
The allowable debt: equity ratio is 3:1. The interest on If the property is replaced by another asset in the year of
any excess is not tax deductible insofar as the excess sale or within three years of the sale and has the same
debt exceeds €500,000. If an interest deduction is economic purpose as the one sold, the capital gain could
limited under these rules, companies may also choose be deferred by the creation of a reinvestment reserve.
to apply a group debt: equity ratio. This may provide an The amount of this reserve is deducted from the purchase
escape route. In certain structures, other limitations of price of the new property for tax base cost purposes.
interest deduction may apply.
As a general rule, neither the acquisition nor renting of real
In the following circumstances debt may be re- estate are subject to VAT. However, an option to apply as
characterised as equity for fiscal purposes: a VAT entrepreneur may be possible and advantageous.
• some types of loss financing; Certain conditions have to be met, and it is important that
• “sham” transactions (i.e. parties only used the loan as the user of the real estate is entitled to a VAT deduction.
legal form but intended something else);
The acquisition of Dutch real estate attracts real estate
• profit-participating loans. transfer tax (RETT) at a rate of 6% based upon its fair
market value. RETT also applies to the acquisition of
An annual depreciation charge from 1% to 3% on legal or economic title of at least 1/3 of the shares in a
buildings, but not land, is deductible for Dutch corporation company, where 70% or more of its assets are Dutch
tax purposes. Higher rates may be allowable subject property.
to proof that the useful economic life of the building is
shorter. The straight-line method is usually applied and is Real estate tax is levied annually by the municipalities
based upon the original acquisition cost. upon the owners of immovable property. The tax rate
differs for each municipality. Real estate tax is deductible
The depreciation of real estate, however, is limited. for corporate income tax purposes.
Real estate held for investment purposes cannot be
depreciated below the so-called “WOZ-value”. This is a No capital duty is due in the Netherlands upon the issue
value that is determined by the municipal tax authorities of shares.
and is used for tax purposes.
• Structuring foreign real estate via a Dutch limited
If real estate is occupied within the group, depreciation liability company could offer attractive tax planning
can take place up to 50% of the WOZ-value. opportunities by using the extensive Dutch tax treaty
network.
58
Norway holds Norwegian real estate. Accordingly, holding shares

in a real estate company will not of itself create a taxable
Contact: Anne Taran Tjølsen permanent establishment in Norway. However, if an
anne.taran.tjolsen@bdo.no individual is undertaking a trading business in Norway
+47 23 11 92 37 (including the buying and selling of shares) this could,
in principle, lead to a permanent establishment being
It is common to hold real estate through a limited created and the profits would be taxed in Norway. Capital
company with the arising rental profit assessed at a flat gains relating to the disposal of Norwegian real estate are
Corporate Income Tax (‘CIT’) rate of 28%. Taxable profits taxable in Norway regardless of residence.
are computed on an accruals basis and ‘CIT’ is reportable
to the tax authorities based on the company’s fiscal year. VAT is payable at a standard rate of 25% with reduced
rates for certain goods and services. The sale and rental
Losses can be offset against gains and 20% of the of real estate is exempt from VAT. It is, however, possible
resulting balance will become either taxable or deductible to register for VAT on a voluntarily basis for the rental of
annually on a reducing balance basis. Companies are real estate.
assessed for corporate tax individually. However, where
common direct or indirect (including foreign) ownership A non-resident individual foreign property owner is liable
is greater than 90% a group is formed. Loss relief is to pay 0.7% to 1.1% in wealth taxes on the value of his
possible within such a group. property
Rental profits attributable to resident or non-resident Real estate located in Norway is subject to real estate
individuals are taxed at a flat rate of 28%. Higher rates tax (“eiendomsskatt”) payable at a local level, and the
may apply when an individual rents out property to such amount can vary significantly depending on the location
an extent that the activities are considered as business of the property. This tax is deductible in determining
income. The rental of at least five flats or business taxable income.
property exceeding 500 m2, are normally considered as
business income. Stamp duty is levied at 2.5% on the consideration paid
for the real estate. This tax is calculated when the deed
Deductions are allowed for operating costs and income that transfers the ownership has been registered in the
generating expenses. property register. This is a national tax and does not vary
based on area or the size or type of property.
Maximum tax depreciation rates apply to fixed assets, on
a reducing balance basis, depending on the deprecation • Norway currently does not have specific REIT
category. Commercial office buildings have a depreciation legislation.
rate of 2%. Other buildings, for example hotels, have a
depreciation rate of 4%. Technical installations in such
buildings, such as air conditioning, refrigeration plants
and sanitary installations are separated from the building,
and depreciated with a rate of 10%. However once
the depreciated asset is valued below NOK 15,000 it
becomes fully deductible from taxable profits. These
rules apply both to Norwegian companies and foreign
companies that hold property in Norway.
Realised capital gains on the sale of Norwegian real

estate are subject to tax at the same rate as rental income
for both Norwegian and foreign companies. A Norwegian
limited company is generally exempt from taxation
of capital gains related to shares in other Norwegian
companies/companies within the EEA Area. However,
since 7 October 2008, Norwegian limited companies,
having realised capital gains related to shares in other
Norwegian companies/companies within the EEA Area,
must declare 3% of these capital gains as taxable income.
This income is assessed at a flat rate of 28%.
Norway does not tax foreign resident shareholders which

sell shares in a Norwegian or a foreign company which
59
Poland tax is payable on land, buildings and structures. The
structures are subject to real estate tax, only if they are
Contact: Andrzej Dmowski used for carrying out business activity. The government
andrzej.dmowski@bdo.pl determines the maximum rate but each local authority is
+ 48 600 092 622 authorised to establish the annual rate of this tax in its
area.
Polish resident companies are liable to pay corporate
income tax at 19%. • Poland has indicated that it is planning to change the
basis of calculation of the local tax on property. Instead
Non-resident companies may also be liable to pay of the surface area basis for a building/land, the basis
corporate income tax at 19%. In general if a non-resident would be the value of the real estate. However, no
company has a seat or management office outside date for the introduction of this change has been
Poland, it is subject to tax liability imposed only on the determined.
income earned in Poland.
The profits of non-resident companies are taxable in

Poland if the company carries out a business in Poland
through a permanent establishment as will typically be
the case for a real estate business.
The general rule is that non-residents require a permit

from the Minister of Internal Affairs and Administration to
buy real estate. Generally, the acquisition of real estate
is invalid if a foreigner does not have the required permit.
However, subject to certain exceptions, the citizens,
entrepreneurs and companies from EU countries and
Switzerland do not require such a permit.
Generally any expenses incurred for the purposes of the

rental business are tax deductible. Interest is allowable
to the extent that it is paid. Related party interest is,
however, subject to thin capitalisation restrictions.
The allowable debt to equity ratio in respect of connected

party debt is 3:1. As a result, interest paid on that part of
the loan that exceeds three times the value of the share
capital is not tax-deductible.
Depreciation is allowable as a deduction for tax purposes.

The allowable rate varies from 1.5% to 10% for buildings
and other structures on a straight-line basis. If certain
conditions are met, building can be depreciated at a
multiplied standard straight line rate. Land cannot be
depreciated.
No separate tax on capital gains applies. Any gains or

losses of a capital nature are combined with all other
income or losses and charged to tax at a rate of 19%.
Capital losses are tax deductible against all income but
only 50% of the loss can be utilised each year.
VAT is applicable for the sale of real estate between VAT

payers. VAT rates of either 22% or 7%, as well as an
exemption, may apply, depending upon the real estate
category. Entities which are not liable to VAT may be
obliged to pay a tax on sale of real estate (stamp duty).
Real estate is subject to local real estate taxes. The
60
Romania An individual may become a taxable person for VAT

purposes if they undertake the supply of new buildings or
Contact: Andrei Antimia building land. An individual may become a taxable person
andrei.antimia@bdo.ro even for a single supply of a new building if it is proven
+ 40 21 319 9476 that they started the construction of the building for a
business purpose. A plot of land qualifies as building land
The Romanian Constitution does not generally allow if it is described as such within the planning certificate
foreign individuals and entities to own land in Romania. (issued by the relevant City Hall) at the date of supply.
However, after five to seven years from the date of EU
accession (1 January 2007), individuals and companies Building tax is generally chargeable upon entities at
resident within an EU member state will gain full rights to 0.25% to 1.50% of the gross book value of the building.
own real estate in Romania. There is also a penalty tax, set by local authorities, at
rates between 8% and 10% which is imposed in relation
Given the above limitation on land ownership, the to buildings which have not been re-valued in the last
most common way of structuring foreign investments three years.
in Romanian real estate is through a Romanian limited
liability company (“SRL”). Land tax is chargeable on the owners of the freehold land
at a fixed amount per square metre, depending on the
The income derived from real estate property owned by location and use of the land.
an SRL is subject to corporate tax at a rate of 16%. A
withholding tax at a rate of 16% applies to most taxable Stamp duty is no longer payable on the acquisition of
revenues paid to non-resident companies, including real estate. Instead, transfer (notary) taxes and fees are
capital gains. payable (usually by the seller) on real estate transactions,
although these do not generally represent a significant
Taxable income from the rental or sale of property is cost.
calculated on normal accounting principles. In general,
expenses incurred for the purpose of generating taxable No capital duty is paid in Romania on the issue of shares.
rental income are deductible. There are special rules
in relation to the deductibility of interest costs, tax • Following EU accession, Romania has implemented
depreciation and service charges. most of the EU Directives. The Parent-Subsidiary
Directive has applied from the accession date, whilst
Interest is generally deductible for corporate tax purposes. the Interest and Royalties Directive provides for a
The allowable debt/equity ratio in respect of connected transitional period until 1 January 2011.
party debt is 3:1. This limitation does not apply where
the loan is granted by Romanian, or most foreign, banks
or other financing institutions.
Romanian companies are subject to corporate tax on

capital gains at a rate of 16%.
Non-resident companies are generally taxed at a rate of

16% on gains from the disposal of Romanian real estate
or shares in a Romanian company. However, this is
subject to the provisions of Romania’s double taxation
treaties which may provide an exemption from Romanian
capital gains tax.
As a general rule, the rental and sale of real estate is

VAT exempt, except for new buildings and building land.
However, an option for entering the taxation regime is
available.
With effect from 1 July 2010 the standard VAT rate has
been increased from 19% to 24%. However, a reduced
VAT rate of 5% is applicable in case of social housing
programme, mainly targeted at first-time buyers of
houses with less than 120 sqm built area and a value
below LEI 380,000 (approx. €90,000).
61
Russia property constitutes more than 50% of its assets) is
subject to withholding tax at a rate of 20%.
Contact: Dmitry Strelnikov
d.strelnikov@bdo.ru It should be noted that certain double taxation treaties
+ 7 495 797 5665 may provide protection from the withholding tax
described above.
Real estate investments are most commonly made either
via a Russian company, or a branch of a non-resident Generally, rental income is subject to Russian VAT at the
company. Inbound investment is often structured via rate of 18%.
entities of other foreign countries (e.g. Cyprus) where the
relevant double tax treaty provides a degree of protection There are no significant taxes or duties applicable upon the
from Russian taxation. acquisition of the real estate. However, the acquisition of
real estate in Russia is subject to state registration duty
Rental profits are generally taxable at a rate of 20%, which of approximately €375 (RUB 15,000).
is applicable both for Russian entities and permanent
establishments of foreign entities. In certain regions, this There is no capital duty payable upon the issue of
rate may be reduced to 15.5%. share capital in Russia. Although there is a minor state
registration duty of up to €5,000 (RUB 200,000) upon the
If a foreign entity owns Russian real estate, its Russian- issue of shares.
source income from renting the property is taxable (via a
withholding mechanism) at a rate of 20%. • There are no expected significant changes in Russian
direct taxation relevant for real estate property
Procedures for the calculation of the tax base are investors.
generally the same for Russian entities and permanent • However, the Russian Government has stated its
establishments of foreign entities. intention to replace property taxes (both individual and
entity) and land tax with a unified real estate tax. Such
Depreciation in respect of immovable property is tax intention was also indicated in the Message of the
deductible. It is calculated in line with the classification President of the Russian Federation on 1 July 2010
of fixed assets approved by the Russian Government. regarding Russian tax policy for the years 2011- 2013.
Different types of real estate are subject to different • Additionally, investors should be aware that immovable
depreciation rates – e.g. office buildings may have an property is subject to Russian property tax at the
expected tax life of thirty years, whereas warehouses may general rate of 2.2% per annum charged on the net
have an expected tax life of fifteen years. Depreciation is book value of assets.
calculated based on the historical cost of the immovable
property. No revaluation of historical cost for profits tax
purposes is generally allowed (except in the case of, for
example, reconstruction and modernisation).
Fixed assets may have an initial depreciation deduction

of 30% historical costs for the assets of the so called
3rd-7th amortisation groups and 10% historical costs for
other groups of fixed assets. An initial deduction at these
rates may also be applied in the case of reconstruction or
modernisation.
Land itself is not depreciated. However, expenses

in connection with the purchase of land rights may be
deductible in certain circumstances.
A direct disposal of Russian immovable property by a

Russian company or a foreign company with a permanent
establishment in Russia is taxable at the normal profits
tax rate of 20%.
Where a foreign entity does not have a permanent

establishment in Russia, proceeds from the sale of
immovable property located in Russia or sale of shares
in a Russian real estate entity (if Russian immovable
62
Serbia No capital duty is paid in Serbia upon the issue of shares.
Contact: Jelena Radovic Real estate owned by legal entities is subject to an annual
jelena.radovic@bdo.co.rs property tax of 0.4% based upon its book value.
+ 381 11 3281 288
Several changes to property tax took place with effect
Serbian corporate income tax is charged at a rate of from 31 January 2009:-
10% with taxable profits determined by adjusting the • property tax on “usufruct” rights is repealed,
taxpayer’s accounting profit, as stated in its income
statement, in accordance with the Corporate Income Tax • there is no property tax on real estate that is recognised
Law. in a company’s financial statements as property
intended for onward sale.
Generally, any expenses incurred for the purpose of a • there is no gift or inheritance tax on transfer of shares
property rental business are deductible. without compensation
Under Serbian thin capitalisation rules, interest and

related costs paid in respect of connected party debt
are recognised as an expense provided that the amount
of the debt does not exceed four times the value of the
company’s share capital. For banks which borrow from a
related party, this limit is increased to ten times the value
of the bank’s share capital.
Depreciation of real estate is tax deductible at a fixed rate

of 2.5% calculated on a straight line basis.
Plant and machinery depreciation is allowable as a tax

deduction at different rates, ranging from between 10%
and 30% on a reducing balance basis, depending upon
the asset category.
A tax credit for investment in fixed assets may be

available for medium sized and large companies in the
current tax year for 20% of the value of the investment
made. The tax credit may not exceed 50% of the tax
liability in the current tax year. The unused tax credit may
be carried forward against taxable profits arising in future
accounting periods, but not for longer than ten years.
Serbian companies are chargeable to tax on capital gains

at a tax rate of 10%. For non-residents withholding tax
on capital gains is charged at 20%, unless otherwise
prescribed by a double taxation treaty.
Capital losses incurred in one tax year can be offset

against capital gains realised in the same year. The
remaining capital loss can be carried forward and offset
only against capital gains in the future, but cannot be
carried forward for longer than five years.
The first transfer of the right of disposal related to

newly constructed structures and the first transfer of
the owner’s share in newly constructed structures are
subject to VAT at rate of 18%.
As of 31 January 2009 transfer tax on share transfers is

repealed although there remains a transfer tax in relation
to “absolute rights” (including leases of development
land) payable at a rate of 2.5%.
63
Slovak Republic or similar taxes are payable on share or other property
transfers, although small administrative fees are payable
Contact: Dagmar Emilova to register such transactions.
emilova@bdo.sk
+ 421 2 4341 5070 Property tax is divided into: land tax, building tax (and a tax
on apartments), and is calculated based on the area of the
The rate of corporate income tax in Slovakia is 19% real estate, its location and its type. The basic rate of land
with taxable profit generally being the accounting profit, tax is usually 0.25% of the cadastral value (depending on
as determined under Slovak statutory accounting rules, the type of land) and is generally payable by the owner
adjusted for tax purposes. of the land, or custodian of land if owned by the state, or
the lessee for leases over five years. If ownership cannot
Generally, necessary expenses incurred to generate and be determined, it is payable by the occupier of the land.
maintain rental income are allowable in arriving at taxable Building tax and the tax on apartments are calculated at a
income. Deductions can include depreciation, interest and rate per square metre occupied by the finished building/
finance charges, real estate taxes, repairs, maintenance apartment, generally payable by the registered owner of
and other types of rental expenses. Alternatively, the the building/apartment.
taxpayer can make a general expense claim of up to 40%
of the rental income instead of itemising deductions. The municipal authorities levy rates on the ownership/
occupation of real property. These rates are deductible
Tax depreciation is calculated on an asset-by-asset basis, for corporate income tax purposes.
on a straight-line or reducing-balance basis, at statutory
rates, and is generally available for expenditure incurred on No capital duty is paid in the Slovak Republic upon the
commercial buildings (but not on the land itself). Tangible issue of shares.
fixed assets are classified into depreciation groups to
which different depreciation periods apply, generally • Tax incentives can include discounts on the price of
between twelve and twenty years. Taxpayers do not publicly-owned real estate. This is treated as state aid.
have to depreciate an asset every year. Tax depreciation Various conditions must be met in order for a company
may be interrupted in any year and continued in a later to qualify for state aid. These include a minimum
year without a loss of the total tax depreciation available. amount of investment in qualifying fixed assets, the
amount depending mainly on the type of project and
A lessee can depreciate a tangible fixed asset held under where it is located.
a financial lease. For tax purposes, the depreciation
period equals the leasing period. The depreciation base
comprises the acquisition value of the leased asset
without VAT, plus expenses related to acquisition of the
leased asset that the lessee incurred before the asset
was put into use.
The value to be used as the basis for tax depreciation

depends on how the asset is acquired and its acquisition
cost; or the taxpayer’s own costs incurred, if the asset is
acquired or developed internally.
Gains derived from the alienation of property are generally

part of the taxable profit for the year of disposal. The tax
treatment of capital losses depends on the type of asset
on which they arose. As such, capital gains on Slovak
real estate are chargeable to tax at the standard rate of
19%. In some cases, capital losses are non-deductible.
An entity can carry forward a tax loss for a period of up to

five years after the year in which the loss arose.
VAT applies to all taxable supplies at a rate of 19%.

However the transfer and leasing of real estate (with
some exceptions) generally represents an exempt supply.
There is no real estate transfer tax and no stamp duties
64
Spain increased rate of depreciation may also be permitted

when sale proceeds from one investment property are
Contact: Carlos Lopez reinvested in a new investment property.
carlos.lopez@bdo.es
+ 34 91 436 4195 Capital gains obtained by Spanish resident companies
and permanent establishments of overseas companies
Investment in Spanish commercial property can be carried are taxed as income. Accordingly, these are subject to
out using a local company, a non-Spanish company, or corporation tax at a rate of 30%.
as an individual. If the investment is carried out using an
overseas company with a permanent establishment in When a property which has been held for at least one
Spain, this will be taxed on the same basis as Spanish- year is sold, and the proceeds reinvested in a new
resident companies. property which is to be held for at least five years, a 12%
tax credit may be available in respect of the disposal of
Rental income of local companies is subject to Spanish the old property.
corporation tax at a rate of 30%. For companies with a
turnover below €8 million, the tax rate is 25% for profits Non-resident companies and individuals are subject to
up to and including €120,202. Over that limit the tax rate capital gains tax at a flat rate of 19%.
is 30%. Deductions are generally available for certain
expenses and depreciation (see below). Where Spanish property is sold by a non-resident without
a permanent establishment in Spain, the purchaser is
Non-resident companies and individuals are subject to tax required to withhold 3% of the consideration, on account
on their gross rental income at a flat tax rate of 24% (i.e. of the vendor’s capital gains tax liability.
no deduction is available for expenses and depreciation).
Property held in individual names will be subject to The historical cost of any property is usually adjusted
Spanish inheritance tax. for inflation in ascertaining the liability to Spanish capital
gains tax.
Since January 2008, wealth tax has been abolished in
Spain. VAT on commercial property is usually charged at a rate
of 16% (18% for commercial property sold from 1 July
In general, expenses incurred for the purposes of the 2010).
rental business are deductible for Spanish resident
companies and entrepreneurs, as well as Spanish Stamp duty is generally levied at a rate of between 0.5%
permanent establishments of overseas companies. and 1.5% on the purchase price of commercial property.
This rate may vary depending on the location of the
Interest paid to related parties is generally allowable property.
provided that the interest charged represents a market
rate and that the debt-to-equity ratio is not considered to Transfer tax on the acquisition of property applies at a tax
be unreasonable for transfer pricing purposes. rate of between 6% and 7% depending on the location
of the property.
The allowable debt:equity ratio - in respect of non-EU or
tax haven connected party - is 3:1. Where property is held through a Spanish company, the
purchase of shares in that company does not generally
Non-resident companies and individuals are not entitled give rise to stamp duty, although transfer taxes at a rate
to any deductions when computing the taxable profits of of between 6% and 7% may be payable where the assets
their rental business. of the company primarily consist of real estate.
As noted above, resident companies and individuals can Capital duty is normally charged at a rate of 1%.
claim a deduction for depreciation on buildings when
calculating their rental profits. No deduction is available Capital duty may also be payable on the share capital of
for depreciation in respect of land. branches or permanent establishments of companies
resident in certain overseas jurisdictions.
For commercial properties, the permissible rate of tax
depreciation is limited to 2%, and for warehouses, 3%. • Following a recent European Court of Justice’s
judgment, it is anticipated that Spain’s withholding
Companies with a turnover below €8 million are able tax rules for dividends will be amended to remove an
to increase the tax depreciation rates for commercial inconsistency between the treatment of dividends
properties and warehouses to 4% and 6% respectively paid to Spanish resident companies and dividends paid
where investment is made on a new property. An to EU parents.
65
Sweden possible to set the loss off against a capital gain one year,
the loss is carried forward to the next year.
Contact: Daniel Bruhn
daniel.bruhn@bdo.se Companies are not normally taxed on any capital gains
+ 46 (8) 459 57 96 realised on the sale of shares, provided the shares are
deemed to be held for business reasons. As a general
Investments in real estate can be made through the use rule, unquoted shares are considered to be held for
of a local company (Sw “Aktiebolag - AB”), a non-resident business reasons.
company, or via a partnership. Net rental income is taxed
in Sweden at the corporate income tax rate of 26.3%. The direct acquisition of legal title to Swedish real estate
is subject to 3% real estate transfer tax. A reduced rate
Swedish tax legislation allows for 25% of pre-tax profit of 1.5% applies to purchases by individuals. For intra-
to be allocated to an untaxed reserve for a period of up group restructuring an exemption is generally granted as
to six years. This gives companies the option of carrying long as the buyer and seller are within the same group
back losses to offset the previous years’ profits. Taxable when the transfer of the real-estate is executed.
interest is deemed to accrue on the untaxed reserve,
calculated at 73.7% of the “Statslåneränta” (the average The sale of shares in a real estate company does not give
market interest rate on Swedish government bonds with rise to any transfer tax liabilities.
a remaining maturity of at least five years) from the end of
November two years before the year of assessment. For An annual property tax must be paid by the owner of
the 2010 tax year, the applicable interest rate is 2.08%. the real estate on 1 January, based upon the taxation
value of the property (typically approximately 75% of the
Non-resident companies and partnerships owning estimated market value). This is a deductible expense for
Swedish property are allowed to deduct interest on business taxation purposes.
borrowings, the annual property tax (see below) and all
property related expenses from their taxable income. There is no capital duty payable in Sweden on the issue
Swedish resident companies are also allowed to deduct of shares.
all other allowable business costs. Costs relating to
the acquisition of real estate, refurbishment costs, and • Because of the participation exemption on the
interest accrued during construction, must be added to disposal of unlisted shares, it is common for a seller
the acquisition cost of the property. of real estate to transfer the real property into a limited
company and sell the shares rather than the real
Whilst there are no thin capitalisation rules in Sweden, loan property.
interest paid at a rate that is significantly above a market • New legislation has been imposed on the taxation of
rate may result in the excess interest being treated as a disposals of participations in partnerships. If the seller
deemed distribution for tax purposes. There are rules on is a company which is entitled to the participation
the deductibility of interest deriving from the acquisition exemption on shares, the disposal of a participation in
of shares from a group company in other jurisdictions a partnership is now also exempted.
which were implemented on 1 January 2009. In general, • The rate for direct acquisitions of the legal title to
there is a requirement that the receiving country taxes Swedish real estate will be increased from 3% to
the interest income or the country is included on the so- 4.25% as of 1 January 2011.
called “white list” of countries that are not considered to
be tax havens. It is important to comply with the rules
concerning transfer pricing documentation for cross-
border lending in order to demonstrate that the interest
has been charged according to Swedish tax law.
Depreciation in respect of buildings, but not the land

itself, is tax deductible. The allowable rate varies between
2% and 5%. The depreciation rate for tax purposes
for buildings does not necessarily correspond with the
depreciation according to the accounting.
Capital gains realised on the sale of real estate are subject

to Swedish corporate income tax at the standard rate of
26.3%, for both resident and non-resident companies. A
loss on the sale of real estate is only deductible against
capital gains arising from the sale of real estate. If it is not
66
Switzerland depreciated over their useful economic life or sometimes

even in one year.
Contact: Hans-Peter Mark
hans-peter.mark@bdo.ch Capital gains on the sale of real estate are regarded as
+ 41 (0) 44 444 36 20 taxable profits and are subject to income tax for both
Federal Tax purposes and in the majority of Cantons.
Despite recent relaxations, Swiss law makes it complex Some Cantons apply a special real estate capital gains
for non-Swiss entities and individuals to acquire real tax. Costs in connection with the disposal of real estate
estate in Switzerland. Federal legislation (the “Lex Koller”) will be deductible from sale proceeds.
restricts the acquisition of real estate in Switzerland by
non-residents. Acquiring real estate typically requires The sale of shares in a “real estate company” by an
permission from the appropriate Cantonal authority. individual or a corporate is also subject to Swiss capital
gains tax.
Companies tax resident in Switzerland pay Swiss income
tax at the Federal, Cantonal and Communal level. The The acquisition of Swiss real estate is subject to
effective total tax rate varies from between 12% and registration duty set by each Canton and which varies
26%. from 0.5% to 5% of the market value of the real estate.
Normally the purchaser has to pay this duty, unless
Expenses in Switzerland are generally tax deductible if otherwise agreed in the purchase contract.
they are directly related to the rental business.
Certain Cantons also apply real estate transfer tax (RETT)
Costs which relate to the acquisition of real estate with the rates varying from 1% to 3.3% of the market
(including the purchase price for property acquisitions) value of the real estate.
must be capitalised and will only be tax deductible by way
of depreciation. A transfer of the majority of shares in a real estate
company may also trigger the RETT and capital gains tax.
Interest payable is usually tax deductible, unless thin Certain double tax treaties may protect against taxation
capitalisation rules apply or the interest rate is considered arising in these circumstances.
excessive. Generally, the Swiss tax authorities only
apply thin capitalisation rules to related party funding. Capital duty of 1% is due on any capital contribution
However, the presence of intra-group guarantees may (cash or the market value of contributions in kind) made
taint the arm’s length treatment of the funding. The upon incorporation (as well as on any subsequent capital
Swiss tax authorities will deem a Swiss company to be increase) of a Swiss company. The first SFR 1 million is
thinly capitalised if the related party debt increases the exempt from capital duty.
company’s debt:equity ratio to greater than 2.3:1 or if
loan finance represents greater than 70% of the market • The restrictions under the “Lex Koller” law are under
value of the company’s assets. discussion by the Swiss Government and Parliament.
It is not expected that any decisions will be made
The rates of interest that are acceptable to the Swiss tax before the end of 2011.
authorities depend on the denominated currency of the • REITS are still in discussion but their early introduction
loan. The maximum rates as at July 2010 are SFR 3.5%; seems unlikely because of the different Cantonal tax
Euro 3.5%; UK£ 4%; and US$ 3.5%. Higher interest regimes.
rates than the above require justification as to their arm’s
length nature in order to secure a tax deduction.
Depreciation is tax deductible at rates guided (but not

prescribed) by law on buildings and assets contained
within buildings. The land itself cannot be depreciated. In
general the allowable rate for buildings is 4% per annum
on a reducing balance basis or 2% on a straight line basis.
The allowable rates are doubled for industrial buildings.
Swiss tax law provides different rates of depreciation

for fixtures and fittings within the building, varying from
20% to 45% per annum on a reducing balance basis. The
rates of depreciation on a straight line basis are half those
applied on a reducing balance basis. However, as the
rates of depreciation are only guidelines, items can be
67
Turkey of the capital gains realised on the sale of the subsidiary
or immovable property is exempt from CIT. Where the
Contact: Haluk Kaptanoglu exemption applies, the seller is also exempt from VAT
haluk.kaptanoglu@bdodenet.com.tr and stamp tax.
+ 90 212 275 96 90
The sale of a non resident company which holds shares
Corporate investors may only invest in Turkish property in a Turkish subsidiary that owns immovable property is
through local subsidiaries. Turkish resident companies not taxable in Turkey.
are subject to Corporate Income Tax (“CIT”) at a rate
of 20% on rental income net of allowable costs and tax Generally under Article 13 of Turkey’s double tax treaties,
depreciation. capital gains derived from the sale of shares in Turkish real
estate companies by non resident and treaty domiciled
Provisional CIT is paid at the end of every quarter. The companies are not taxable in Turkey.
fiscal year is generally the calendar year, although this can
be changed. Assuming a calendar year end, the final CIT Rental income and capital gains derived from the sale of
return is required to be filed by 15 April. properties by real estate investment companies (“REICs”
which are a form of a real estate investment trust) are
Dividends paid by Turkish companies are generally not taxable. Furthermore, no dividend withholding tax is
subject to 15% withholding tax, unless the shareholder applicable on dividends paid to non-resident corporate
is resident in a country which has a favourable tax treaty investors in REICs.
with Turkey.
Rental income and the transfer of commercial property
Tax deductible expenses include land registry duty paid are subject to Turkish VAT at the rate of 18%.
on acquisition, annual real estate tax, interest on loans
used to buy the property, taxes relating to construction The buyer and seller of property each have to pay a
and land development, operational costs, repairs and property sale-and-acquisition levy of 1.65%, based on the
maintenance costs and depreciation. sale value of the asset. The levy is paid on registration of
the transfer by the Land Registry.
Interest, foreign exchange losses and related financial
expenses incurred on excess loans where a company is Stamp duty is generally due on property transfers at a rate
considered to be thinly capitalised are not tax deductible. of 0.825% of the amount stated in the contract. Stamp
If the ratio of borrowings from shareholders, or from duty is also payable on lease agreements, generally at
persons related to the shareholders, exceeds three times 0.165% of the annual rent.
the shareholders’ equity in the borrower at any time within
the relevant year, the excess proportion of the borrowing A fee of 0.04% is payable on the formation, or increase in
will be considered as “thin capital”, with a consequent share capital, of a company.
reduction in the level of interest relief available.
• An optional appraisal of the sales/rent value upon
Depreciation may be calculated by applying either a transfer or lease of real estate is being considered in
straight-line or reducing-balance method, at the discretion Turkey.
of the taxpayer. Depreciation in respect of immovable • One strategy for optimising the taxation treatment of
property is tax deductible. Buildings are depreciated at a Turkish real estate would be the sale of a non-resident
rate of between 2% and 10% per year depending on the holding company which holds the shares of a property
type of building. Different depreciation rates are used for owning subsidiary to another non-resident.
tangible assets within the building. The land itself is not • Investment in Turkish real estate in the form of a
depreciable. REIC is the most tax efficient method for non-resident
individuals and corporate investors.
On disposals of shares and immovable property, capital
gains arising are included within income and subject to
CIT.
An exemption from tax is available if certain conditions

are met. However, this exemption is not available for
property investment companies or companies trading in
property (or shares). For other companies, where the
shares or real estate assets have been held for a period
of over two years and 75% of the profit on sale is booked
to a special reserve account for at least five years, 75%
68
United Kingdom balance basis. From 1 April 2012 the annual rate drops
from 20% to 18%. For expenditure on items considered
Contact: Stephen Herring to be integral to the “shell and core” of the building, relief
stephen.herring@bdo.co.uk is available at 10% per annum on a reducing balance
+ 44 (0) 20 7893 2437 basis. From 1 April 2012 this rate drops from 10% to 8%.
UK resident companies are subject to UK corporation tax From 1 April 2010, an annual investment allowance (‘AIA’)
at a current rate of 28%.This rate will be reduced by 1% gives taxpayers a 100% deduction on £100k of qualifying
each year until it is set at 24% in April 2014. A lower rate expenditure per company, group of companies and
of 21% currently applies to smaller companies. From April unincorporated business. From 1 April 2012, the AIA cap
2011 this rate will be reduced to 20%. However resident is reduced from £100K to £25K of qualifying expenditure.
corporate entities are seldom used by inbound real
estate investors. Non-resident entities (and individuals) Depreciation is, in principle, “clawed back” on disposal
are generally subject to income tax at the basic rate of but the relevant disposal value is normally fixed by a joint
20%; although it should be noted that individuals may be election made by the purchaser and vendor.
taxable at higher rates (up to 50% from 6 April 2010).
Inbound investment in UK property is often structured The standard rate of VAT in the UK is currently 17.5%, but
through Channel Islands entities or other non-UK resident is due to increase to 20% on 4 January 2011. Where the
entities which may have double tax treaties with the UK property owner has unusually not exercised the option to
providing certain treaty protection. tax the property, the rental and sale of the property will
be exempt from VAT.
HM Revenue & Customs require non-UK resident owners
to register under the “Non-resident Landlords Scheme” if A UK corporate vehicle is liable to tax on capital gains as
they wish to avoid tenants (or property agents) deducting part of its total income at (up to) the current 28% rate but
basic rate income tax from their rental payments. an allowance is given for increases solely attributable to
retail price inflation. No “roll-over relief” is available even
Taxable rental income is generally calculated on normal if the proceeds of sale of investment properties are fully
accounting principles but special rules typically apply re-invested.
to interest costs and tax depreciation. Generally any
expenses incurred for the purpose of the rental business Non residents are not liable to tax on capital gains on
are deductible. However, certain specific expenses are disposals of UK investment properties despite the
disallowed, such as tenant entertaining. provisions of most tax treaties which would give the right
to the UK to tax these gains.
An important exception is that non-resident investors
subject to income tax are generally unable to obtain The acquisition of UK real estate is subject to Stamp Duty
relief for losses on foreign currency loans. Interest to Land Tax (“SDLT”) at a rate of 4% for land transactions
connected parties is allowable to the extent that both over £500k. Lower rates apply below this threshold.
the loan principal and loan interest represent normal
commercial arrangements. There is no “hard and fast” Acquisitions of corporate real estate entities are exempt
debt:equity ratio for connected party real estate debt but from SDLT but there are, of course, certain legal,
a debt:equity ratio of 3:1 is often accepted. commercial and other taxation issues which would arise.
For example, it is not generally possible to “step-up”
Accounting depreciation in respect of freehold land and the base cost of the asset to market value. Otherwise
buildings is not allowed as a tax deduction. No allowances mitigation of SDLT liabilities is increasingly problematic
are available for office buildings or retail shops except to but certain planning approaches may be available in
the extent that the expenditure represents eligible plant suitable circumstances.
and machinery.
No capital duty is paid in the United Kingdom on the issue
The industrial buildings and hotels allowances regime of shares.
has been amended so that balancing adjustments and
the recalculation of writing-down allowances in respect • Non-residents trading, as opposed to investing, in UK
of balancing events occurring after 21 March 2007 has property are liable to UK taxation on the surpluses
been withdrawn with only minor exceptions. On 1 April obtained from the disposal of real estate. The
2010 the annual writing down allowance was reduced to difference between property investing and trading
1%. From 1 April 2011 industrial buildings and hotels in the UK is both critical and complex. Physical
allowances will be withdrawn. development activity may be either for a trading or
investment purpose and, accordingly, is not the main
For expenditure incurred on or after 1 April 2008, plant criteria.
and machinery, including fixtures and fittings, not • The UK introduced a UK-REIT regime for listed
considered to be integral to the “shell and core” of the companies effective from 1 January 2007.
building qualify for relief at 20% per annum on a reducing
69
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CLIENT SERVICE AND TENANT
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Notes
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Notes
72
King Sturge Contacts
INTERNATIONAL ASSOCIATED & AFFILIATED

Office Agency
Jeremy Richards (Regional Offices) +44 117 930 5745 Austria
Mark Bourne (London Offices) +44 20 7796 5461 MRG Metzger Realitaten Beratungs
Rupert Perkins (International) +44 20 7796 5462 und Bewertungsgesellschaft mbH +43 1 597 50 60
Investment Alfons Metzger
Philip Marsden +44 20 7087 5390 Cyprus
Penny Hacking +44 20 7087 5332 AMP Andreas Pantazis Ltd
Valuation Michalis Pantazis +357 22 676 423
Richard Batten +44 20 7087 5757
Jonathan Manley +44 20 7087 5750 Denmark
Financial Services Sadolin & Albaek A/S
Chris Pratt +44 20 7087 5220 Peter Winther +45 70 11 66 55
Research Estonia
Angus McIntosh +44 20 7087 5500 Re&Solution
Andrew Burrell +44 20 7087 5510 Vitali Kollomets +372 6314 533
Emma Jackson +44 20 7087 5518
Finland
Belgium Newsec Maakanta Oy
Cedric van Zeeland/Jean-Philip Vroninks +32 2 286 9182 Hannu Ridell +358 207 420 400
Greece
BULGARIA King Hellas
Andrew Peirson +359 2 980 70 08 Thomas Ziogas +30 210 7711 204
Croatia Italy
Jens Moller Madsen +385 1 48 26 114 Gabetti Property Solutions Agency S.p.A.
Inara Jucinska +39 02 77 55 243
Czech Republic Ireland
Angus Wade +420 234 703 333 HT Meagher O’Reilly Ltd
Declan O’Reilly/Adrian Trueick +353 1634 2466
France
Paul Betts +33 1 44 55 70 00 Latvia
Philippe Semidei Re&Solution
Guntars Cauna/Irina Nikolajeva +371 67 50 8400
Germany Lithuania
Sascha Hettrich +49 30 23 322 211 Re&Solution
Neringa Rastenyte +370 5 252 6444
Hungary
James Kinnell +36 14 51 10 10 Luxembourg
RealCorp Luxembourg SA
Poland Michael Chidiac +352 26 27 29
Jason Sharman +48 22 256 08 00 Netherlands
DRS Makelaars
Romania Merijn F. Hartog +31 20 640 5252
Radu Boitan +40 21 311 5444
Northern Ireland
Serbia McConnell Martin
Srdjan Vujicic +381 11 2200 101 Rory McConnell +44 28 90 205 900
Norway
Slovakia Newsec AS
Peter Nitschneider/Miroslav Barnas +421 259 209 911 Nils Arne Gundersen +47 23 00 31 00
TURKEY Russia
Matthew Warner +90 212 236 4990 SA Ricci
Vladimir Avdeev/Alexey Bogdanov +7495 790 7171
Sweden
Newsec Advice
Marie Bucht +46 8 454 40 00
Switzerland
Key Real Estate Consultants
Robert Mathieson +41 22 545 51 00
United States of America
Corfac International - John Payne +44 117 930 57 16
All data contained in this report has been compiled by King Sturge LLP and is published
for general information purposes only. While every effort has been made to ensure the
accuracy of the data and other material contained in this report, King Sturge LLP does
not accept any liability (whether in contract, tort or otherwise) to any person for any loss
or damage suffered as a result of any errors or omissions. The information, opinions and
forecasts set out in the report should not be relied upon to replace professional advice
on specific matters, and no responsibility for loss occasioned to any person acting, or
refraining from acting, as a result of any material in this publication can be accepted by
King Sturge LLP.
© King Sturge LLP September 2010
This publication is printed on recycled, post-consumer fibre, totally

chlorine free paper produced from sustainable stock. FSC certification.
LOCATIONS
European Office Property Markets 2010

UK
England • Scotland • Wales
THROUGHOUT EUROPE
including:
Belgium • Bulgaria • Croatia • Czech Republic • France • Germany • Greece
Hungary • Ireland • Italy • Luxembourg • Netherlands • Poland • Romania
Russia • Serbia • Slovakia • Switzerland • Turkey
THE MIDDLE EAST
THE AMERICAS
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ASIA PACIFIC
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Property Markets 2010
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© King Sturge LLP September 2010

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Executive summary 2 What are the main European real estate

Executive summary of a recovery in office development activity. This

Source: King Sturge Q2 2010

Eastern bloc emerges strongest 0

Emerging economies in Central and Eastern Europe -1

(CEE) saw some of the deepest contractions in -2

output last year, as manufacturing was decimated -3

Sofia 246 2.1 35 Trend line

EU27 48,951 1.2 3,910 20

Source: Oxford Economics, July 2010, based on NUTS3 regions 0

Source: King Sturge

Slow office recovery led by global centres

3 CEE centres are Belgrade, Bratislava, Bucharest, Budapest,

Chart 5: European office rents

Source: King Sturge

upturn in prime rents. As noted, the recovery in €10

demand is expected to be relatively patchy across

freeze on finance, larger deals have also been more

As the market revived from mid-2009, office yields

On average, prime office yields in the west were

After unprecedented compression in the boom

While there is no prospect of a return to the doldrums

Prime rents and

In-town Out-of-town In-town Out-of-town

300 5.5 300

200 5.0 200 6

100 4.5 100

In-town Out-of-town In-town Out-of-town

Contact: Advice – Hannu Ridell Contact: Investment – Christophe Audoux

In-town Out-of-town In-town Out-of-town

In-town Out-of-town In-town Out-of-town

Take-up slowed to 1.8 million m² during 2009, which was the

The investment outlook remains cautious. Volumes are likely to

Contact: Investment – Sascha Hettrich Contact: Investment – Sebastian Ott

In-town In-town Out-of-town

In-town Out-of-town In-town Out-of-town

Investment turnover is likely to increase in the second half of the

In-town Out-of-town In-town Out-of-town

In-town Out-of-town In-town Out-of-town

The investment market has continued to be slow, with a low

In-town Out-of-town In-town Out-of-town

The investment market remains subdued in Belfast with prime

Prime rent (€/m2/annum) Prime yield (%)

Contact: Agency – Andrew Hayes Contact: Agency John Clement

In-town Out-of-town In-town Out-of-town

Contact: Agency - Campbell Hart Contact: Agency – Richard Thornton

In-town Out-of-town In-town Out-of-town

Contact: Agency – Mark Bourne/Chris Watkin Contact: Agency Chris Mulcahy

City West End In-town Out-of-town

London prime rents and yields

Contact: Agency – Simon Taylor Contact: Agency – Piers Leigh

In-town Out-of-town In-town Out-of-town

In-town Out-of-town In-town Out-of-town

Note: Rents and yields (2006-8) from secondary sources

In-town Out-of-town In-town Out-of-town

European Office Property Markets 2010/11

Executive summary 2 What are the main European real estate