Warehouse yields surge as malls and office space lose their luster

Modern office space rentals in the Athens basin have receded to 1998 levels, according to a recent study by consultants and surveyors’ firm Danos & Partners. The study also finds a fall in the prices of commercial property sales and notes that opportunities are now especially to be found in the realm of warehouses and logistics leasing. In warehousing, pretax returns average 11-12 percent, partly due to the fact that this particular segment of the market is still at an early stage of development. By contrast, office space rentals yield an average 8-8.5 percent. The report notes that the Greek logistics market today offers investors the most competitive yields in the Mediterranean. New development schemes are encouraged by the 40 percent state subsidy for investment in border regions such as northern Xanthi. Currently, the market anticipates with interest the completion of a self-financed industrial park by the AEGEK construction company in Astakos, Aitoloakarnania, in western Greece. In the wider Athens region, the high cost of land in western areas, such as Aspropyrgos and Elefsina, has so far apparently deterred foreign firms, such as Hays Logistics, from investing in new warehouses that could be leased. The only worthwhile investment appears to be in warehouses for a company’s own use. Among the most important investors in this field are Hellenic Railways (OSE) – Greece’s biggest landowner – which is building warehouses to be used by Athens 2004, the organizers of the Olympic Games, and Ethniki Real Estate, a National Bank subsidiary, which is building similar installations in Magoula, in Attica. In commercial property, the decline is more marked in final sale prices rather than rentals. On Ermou and Tsakaloff, two of Athens’s most commercial streets, rents have stayed at high levels and the same has been observed in other areas of outlying hubs, such as Metaxa in Glyfada and Kolokotroni in Kifissia – the most expensive in the suburbs. The picture is still rather hazy regarding shopping malls that also offer entertainment facilities. After the doubts that suddenly surfaced regarding Lamda Development’s ambitious mall in Maroussi and the Piraeus Plaza Center on Pireos Street, Sonae Haragionis’s planned complex in Neo Faliron, next to the Karaiskaki Stadium, has also become the object of repeated postponement. As a result, investment fund Pradera, which acquired Village Park in Rendi, expects the ratio of shopping mall area per capita in Greece to remain at around 20 sq.m. The respective ratio in Portugal, often used in comparison given its similar size and stage of economic development, is 110 sq.m.

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