Strong demand for modern offices is encountering constraints
The office market in Athens is benefitting from improvements in the Greek economy and attracting more interest from local and foreign tenants. The Greek Depression resulted in a considerable contraction in size and activity of the market, so much so that few schemes were completed. There is now little supply of high quality buildings in the prime office areas and this has led to a shortage of Grade A and B offices. As a consequence, prime rental values have been increasing over the last 3 years in the most sought-after areas, such as in the CBD and in the areas of Kifissias and Syggrou Avenues. On the other hand, the stock of Grade C and D office remains high while the demand for such premises is almost non-existent. The Athens City Centre is expected to achieve higher rents in 2019, as rental values are expected to increase together within the wider growth of the economy. Athens is no exception to the co-working and flexible workspace boom in Europe as more than 20 buildings were converted into co-working spaces in the Greek capital city.
Revitalised investment market leads to a decrease in yields
The improvement of the economy also boosted the interest of institutional investors. Greek REICs and real estate investors plus foreign private equity funds are looking at the market for properties with good tenants.
High quality single assets or property portfolios are sought-after, which led to yield contractions especially for properties in prime office locations (to around 7%-7.75%), and also in secondary locations if the property is leased to a good tenant (to around 8%-8.5%).