Yields on office investments in Greece are among the highest in Europe, reaching the 6% mark, but the gap is closing as rising interest rates and inflation wreak havoc on commercial assets.
According to a report from BNP Paribas Real Estate, office yields in Athens were at 6% in the first quarter of the year, versus 4.5% in Lisbon and 4.1% in Madrid and Rome.
Office investments in Greece’s small but growing market may be performing better than elsewhere in Europe where commercial assets are taking a severe hit, but trends are changing.
“Prime yield compression came to an end in 2022 closing off ten years of declines. Mid-2022 showed the first signs of expansion that have strengthened since. Decompression is affecting all the main sectors of real estate”, said BNP Paribas in a report titled “Europe CRE 360”.
“Several markets experienced a 100bp or more expansion such as Amsterdam (+120bp), Berlin, Madrid, Milan and Prague (+100bp) since Q1 2022,” it added.
Despite the steady flow of new green office buildings entering the Athens market, demand is still outstripping supply. Greece’s ten year economic crisis left the market starved of new energy efficient offices, while remote working has not taken off in Greece to the same extent that it has elsewhere in Europe.
Experts point out that due to the relatively low number of high tech jobs in the Greek economy, the number of positions that can be performed on a remote basis are limited, supporting demand for office space.
While office vacancy rates in Athens are at 4%, among the lowest in Europe, prime rents in the Greek capital are at 330 euros per sq/m on an annual basis. This compares with 312 euros per sq/m in Lisbon, 441 euros in Madrid and 500 euros in Rome.
“Having sustained value over the crisis period, prime office rents in the key cities are now growing again. With the widespread uptake of hybrid work models, companies are seeking attractive and modular workplaces offering greater connectivity,” said BNP Paribas.
“The very low availability of prime assets and the appeal of high quality buildings located in the most sought-after districts drive values up,” it added.