Improved business activity is creating demand for modern space
The demand for quality office space (grade A) in the major business districts of the city remained intense over 2019 and led to take-up of 80,000 sqm over the year. Demand came from relocation of existing tenants and new business activities from start-ups. Relocation is taking advantage of the new buildings that exist in Athens. The office sector lacks modern units and undersupply means that the vacancy rate is low at 5.7% in 2019. Development is improving gradually. Prodea REIC commenced construction of two buildings in Maroussi and Sygrou Ave. Trastor REIC are refurbishing a unit known as “DOL offices” in Athens and the joint venture of Dimand-Grivalia in Piraeus is building 60,000 sqm Papastratos’ facilities. There are incoming regulatory changes that will assist development. The government is suspending VAT on new properties and on unsold properties built after January 1st 2006. It will also allow 40% discount for building repairs and refurbishment will strengthen construction activity. The improvement in the Greek economy (GDP 2.0%) in 2019, political stability and ongoing employment gains will support the demand side of commercial real estate market. With the low vacancy rate, rental prices are increasing and now stand at €252/sqm/year.
The Athens investment market is improving creating a reduction in yields
Stability also helped improve the investment market in Athens that posted a total investment volume of €550m in 2019. Portfolio sales drove a lot of the activity with the largest one coming from Brook Lane Capital who bought five buildings in the Maroussi district for €95m. Dromeus Capital Captial bought four buildings located in the CBD, Chalandri and Piraeus for €93m. Trastor REIC bought four buildings for €27.8m. The improvement of the situation in Greece is appealing to foreign investors who are now buying in the market. The Athens centre and the northern suburbs of the city show increase in rentals and helped drive the yield down to 6.5% in 2019.