The central bank of Greece has played down concerns about the impact that rising interest rates and remote working are having on the country’s commercial real estate properties as the price of office buildings slide in Europe and the US.
Falling demand for office space and a shift to remote working amidst the rising cost of money have created enormous pressure on office buildings globally raising concerns about the knock on effect this will have on banks due to heavily lending the sector.
In its monetary report, the Bank of Greece says that recent increases in commercial real estate prices in the country have significantly lagged behind hikes in residential real estate.
“Additionally, commercial real estate prices remain significantly lower than peak prices observed before the financial crisis,” the report adds.
Overall, the exposure of the Greek financial system to investments and loans
related to commercial real estate is close to the European average, the central bank adds, pointing out that these asset prices are still below levels seen before the country’s economic crisis.
Rents will be challenged
Others, however, are not that optimistic.
In its latest quarterly report on the office sector, Proprius Cushman & Wakefield says that “office rents will be challenged in 2023”.
This is due to the delivery of new buildings, it says, adding that rising inflation is putting further upward pressure on rents in combination with a shortage of quality and well-located office space in Athens.
“Harder financing climate results in higher return requirements among real estate investors, as risk increases, and volatility grows. However, the revitalised tourism sector and authorities' support measures mitigated the impact, leading to increased activity in the sector at year end,” the company stresses.