By Manja Segrt - Bloomberg

The Balkan region is the only European market where real estate growth has not been hurt by turmoil in global credit markets, said Philip Bay, regional director of Colliers Southeast Europe.

“The Balkans are Europe’s last frontier,” Bay said in an April 17 interview in Zagreb. “When this becomes more like Central or Eastern or Western Europe, it will have a moderate growth rate, which is fine.”

Economies in Croatia, Romania and Bulgaria have grown at twice the rate of the 15 countries sharing the euro, as property investors built hotels along the Croatian and Bulgarian coasts and manufacturers expanded production in Romania and Bulgaria after those two countries joined the European Union in 2007.

Colliers said in its annual global office real estate review published this month that the United States subprime mortgage crisis, which has made it harder to borrow money to finance property deals in Western European and the US, won’t have the same effect in Eastern Europe, the Middle East and South Africa.

“We have lots of big investment funds coming here which are not necessarily dependent on the money from the City of London,” Bay said.

A decrease in the number of investors in Eastern European markets has still left “more capital chasing investment products than available assets,” it said in the report.

“There are some big Arab funds running around now,” Bay said. “The Russians are big in Bulgaria and Montenegro and they would like to buy here too. I think we’ll have less of a downturn if at all.”

Colliers said in its report it expects investment growth to be higher this year than in 2007 in most Eastern European, Middle Eastern and African states. The company opened offices this year in Albania and Montenegro.

A lack of available retail space in city centers in the region is making companies such as clothing and apparel retailer Zara enter markets in shopping malls instead of main shopping streets, the company’s usual practice, Bay said.

“That’s a problem everywhere in the Balkans, every capital city has an undersupply of high-street locations, there are no vacancies, it’s all full,” Bay said.

Real estate markets in the Balkans have been hurt by weak laws that often make it difficult to enforce contracts, Bay said. As the markets mature and become more like those in Central and Western Europe, he said, the people who were attracted to the Balkans will move on.

“All the yahoo-kind of entrepreneurs are going to go to North Africa, because that will be the next kind of fun work,” Bay said. “When this is done, it’s over. Then Europe is boring, but most people like it that way.”