LOOKING AHEAD-2018. Diversity of investors is unprecedented

Marios Apostolinas

Chief Executive Officer

Intercontinental International REIC

With the start of the New Year, the Greek commercial property market has presented clear signs of a turnaround. During the last few months a yield compression has been observed in the sales transactions of prime assets, but the most striking feature is the widespread presence of foreign (direct or indirect) property investors and in particular:

i) The - unprecedented for Greek standards - diversity of active foreign investors in terms of category and origin. There is investment activity ranging from high net worth individuals and family offices to multi-billion institutional funds coming from, indicatively, EU, North America, Latin America, China, Russia, and the Gulf Countries.

ii) The fact that foreign investors are targeting a great variety of real estate types such as hotels, office centers, retail, and residential.

One explanation for the attraction of investors from around the globe is Greece’s strategic geographic location and long history. The country’s natural beauty and wonderful climate support demand in tourism and create an enticing environment to reside in. Tourism is significantly boosting a number of real estate uses, directly or indirectly, related to hospitality real estate.

By investing in Greece, global investors benefit from one of the highest property yields in the EU. Most of them believe that today we are facing the low point of the real estate cycle and they are further encouraged by the trend of the Greek 10-year bond spread. Greece has been in austerity for many years and some results have appeared. Growth of the Greek economy is expected. The Grexit possibility has faded away. In regards to political uncertainty, most cross-border investors seem convinced that reforms are progressing and will be implemented, regardless of which government is leading the country.

Furthermore, the overall occupancy cost today has declined significantly from its peak. The prime office rent level is lower than in other neighboring countries, such as Romania. Greek office rent, for quality space, is on the increase. Prime retail rents also bottomed out and retailers are now accepting high turnover rent or annual rent escalation clauses.

Most of them believe that today we are facing the low point of the real estate cycle and they are further encouraged by the trend of the Greek 10-year bond spread.

The ‘Greek origin’ investors living abroad constitute a significant link to capital, as a lot of them are interested in Greek property.

Last but not least, foreign investors have realized that they can become involved in various product types which are familiar to them but, at the same time, either remain unexplored in Greece or lag significantly, considering the state of play in other countries. Some examples of sectors not adequately developed in Greece are retirement housing, student housing, medical and medical tourism properties.

Times have been tough in Greece but the country is experiencing times of change at every level; as per the John F. Kennedy quote ‘Change is the law of life. And those who look only to the past or present are certain to miss the future’.