BERLIN-Investment in European real estate should rise another 15% this year after it soared 35% in 2010 to reach $132 billion, according to realtor CB Richard Ellis. In a new report it predicts that Germany, Nordics and central and eastern Europe will be of particular interest - and pinpoints Greece, Spain and Portugal as countries where stretched government finances will significantly impair interest.

“Sovereign debt risks, volatile bond markets and fiscal austerity will be potent influences on Europe’s economic weather in 2011, with clear potential for squalls and storms to affect the progress of recovery,” said Peter Damesick, a chief economist for CBRE. European retail is identified as an attractive sector, as investors search for prime stock in core European countries. This trend has been prominent over the past two years and looks set to continue at the expense of office. Large regional shopping centres will be a major focus.

Purchasing in the past 12 months has been powered by domestic investors. However, cross-border investment will rise in 2011, with sovereign wealth and state pension funds likely replacing US opportunity fund demand. Michael Haddock, CBRE Director of EMEA Research, commented: “There is no shortage of capital targeting the European real estate market but it remains predominantly risk-averse and strongly focused on security of income. Moreover, there is no obvious catalyst for a recovery in the secondary market. The focus of activity in 2011 will be firmly on the prime end.”