Commercial property market set to bottom out by 2014

According to market insiders, the local commercial property market will end its decline of recent years and start looking up again within 2014, if not earlier.

Rental rate renegotiations and reductions, the drop in prices and the increase in empty flats and buildings are seen continuing until the end of the third quarter of 2013, the same sources say, which will also offer some genuine investment opportunities.

The slide in commercial property prices, even those of top-quality buildings, is the main reason why investors have recently been on the lookout for opportunities, as not only is there a greater margin for capital gains, but there has been an increase in yields that are now approaching 8.5 percent in the office market.

Eurobank Properties managers believe that this year the opportunities in the market will multiply, while the adjustment period for rents is expected to end.

Aristotelis Karytinos, general director for real estate at the National Bank of Greece group and chief executive at subsidiary Ethniki Pangaia Properties, says the latter is currently examining a series of investment proposals in a bid to strengthen its profile further ahead of its listing on the Greek bourse through the acquisition of Eurobank Properties, of which it controls over 56 percent. The company is also preparing for its possible participation in tenders for the utilization of some state properties.

Ethniki Pangaia was at the forefront of one of the biggest investments in recent years a few days ago as it has acquired a property of 60,000 square meters on the Attiki Odos highwa, near Paiania in eastern Attica for 120 million euros. This purchase was 100 percent funded by its own capital. The property has been leased for a period of 32 years to leading cell phone operator Cosmote and offers an annual yield that reaches up to 8.5 percent, while the seller was a company belonging to Dimand Real Estate property developers.

Karytinos told Kathimerini that this move forms part of the company’s investment policy that provides for spreading the risk across its lease tenants, as this is something that foreign institutional investors appreciate considerably.

“It is in our interest that a company such as ours does not only have one tenant, but also long-term cooperation with other solvent tenants. The size of our company is such that in order to achieve the dispersal mentioned before we need new investments of a significant size, such as the one we have just implemented,” he stated.

The value of Ethniki Pangaia’s portfolio exceeds 700 million euros, with the bulk of that concerning properties leased by the National Bank group. The addition of the new building on Attiki Odos, however, adds another advantage, which is the high resale value, especially if the company attempts to approach buyers abroad so as to cash in any capital gains in the future.

That is due to the fact that this is the first building in Greece to have obtained the LEED Gold certificate – a voluntary assessment document marking a building’s energy performance, location, use of water supply etc and rewards innovative planning. International investment funds which acquire properties tend to prefer buildings that have energy certificates and thereby secure higher sale prices.

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