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Allianz seeks to tap Eastern Europe office boom

Vienna

THE office boom in central and eastern Europe, driven by lower wages and a growing pool of local talent, has got the attention of the world's biggest real estate investor.

"Banks and financial services firms are looking for cost-efficient office space and for skilled people, which they can still find in the region," said Thomas Villadsen, the head of Austria and Central & Eastern Europe at Allianz Real Estate.

The company plans to spend as much as 500 million euros (S$770 million) over the next two years on property in the region.

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Munich-based Allianz hired Mr Villadsen last year to set up shop in Vienna and become more active in the fast-growing region.

With 72 billion euros of real estate assets globally, Allianz is the world's biggest landlord but has been late to target a region where Austrian rivals such as CA Immobilien Anlagen or Immofinanz led the pack.

Allianz will look at investments in the capital cities of Warsaw, Prague, Bratislava, Budapest or Vienna, while staying away from south-eastern Europe, where it considers political and economic risks too high, Mr Villadsen said.

It agreed to buy the Icon tower at Vienna's main railway station from Signa Holding GmbH last year for about 500 million euros.

Banks are among the drivers of the expansion, which has advanced from the days in which it was low-skilled jobs like call centres that moved east.

Morgan Stanley employs more than 1,000 people in its Budapest office, providing firm-wide services from risk modeling to internal audit. Goldman Sachs Group last year said it plans to hire another 150 people in Poland in addition to its existing 600.

Allianz plans to grow real estate investments in Austria and CEE to as much as 5 billion euros within 10 years, from 3 billion euros now, Mr Villadsen said. Apart from office space, he's also looking at residential properties and logistics.

Prices in some cities have risen so much that Allianz is already dropping out of some bidding rounds, for instance in Warsaw, according to Mr Villadsen.

In Poland, top yields are around 4.5 per cent to 4.7 per cent and falling, he said. In Vienna, yields are between 3.5 per cent and 4 per cent while Prague sees some deals below 4 per cent. Yields in Budapest are about 1 percentage point higher than in Prague. BLOOMBERG