Stability of the office market
Over 2019, the office market in Cyprus enjoyed a period of stability, which reflects solid economic growth since 2014. Economic growth of 3.9% in 2018 was maybe slower in 2019 at 3.1% yet employment gains are continuing. Strong growth has meant that unemployment is declining rapidly and that is translating to greater office demand, particularly for Grade A offices.
Nicosia is the capital and financial centre of Cyprus, historically home to the public sector and most of the large businesses operating on the island. Office space in Cyprus is traditionally found in the old common type multi-storey buildings, which are mainly located in the heart of the city. However, land constraint and the need for modern premises is seeing decentralization occurring.
The core location preferred by occupiers is the CBD although the more mod-ern buildings are in the decentralized areas. Grade A offices in Nicosia are seeing rental growth as businesses take advantage of stability to relocate and expand. The IRIS, the Agents Association, EAC, Department of Registrar of Companies, EASO (European Asylum Offices), Microsoft are all large bodies actively looking to relocate to grade A office premises.
Nicosia office market is experiencing yield compression
The residential market is mostly the focus of Cypriot property developer activity. Yet, the last four years of economic growth has opened opportunities for the construction of office facilities intended mainly for multinational companies.
In turn, that has attracted the attention of local and foreign investors seeking to acquire as-sets. The market is small; none-the less it is quite active and has resulted in Grade A office prime yields compressing from 5.5% in 2018 to 5% in 2019. Over 2020 the economy’s performance will continue to accelerate development and support the investment market.