LONDON-European governments are increasingly considering disposal of real estate as part of deficit-reduction plans, and $1.6 billion of such assets were sold in 2010, mainly in Sweden, Germany and the UK, far above 2009, says CB Richard Ellis. Activity should pick up this year after some legal hurdles have been cleared.

In a study, CBRE found that sales’ success hinges on the motive and type of asset, but investor demand is strong to tap into government-backed income streams and this complements governments’ need to rationalize space.

“Different European public authorities are handling the issue in various ways,” said CBRE’s Fabian Klein. Some countries have set up or are considering outsourced vehicles for management of assets. Austria has placed a major part of its public real estate into a quasi-private firm under state control, but has not yet started disposals. Italy wants to transfer central government-owned assets to local authorities, with the likely creation of funds such as Milan’s $170 million Fondo Immobiliare – Comune di Milano II - while Italian Public Pension and Insurance Fund ENASARCO, has already announced divestment of a large part of residential and retail assets. Spain plans to create regional level vehicles and then intends to auction selected assets held by regional bodies.