ECONOMY

Athens office property market records 5.8-percent drop in rental costs in the second half of 2001

The office property market in Attica appears to be going through a slump, according to figures published by real estate developers operating in Greece. They said that office rental costs went into a decline in the second half of 2001, compared with a slight increase in the first half of the year and all through 2000. According to a pan-European survey of office space conducted by realtor CB Richard Ellis, Athens recorded a 5.8-percent drop in office rental costs on a yearly basis. This in turn reduced price increases in the last two years by 9 percent. Other property developers have also noted the market downturn, with some dating the decline to July last year. The property slump affected areas considered prime sites such as Kifissias Avenue, the city center and other central locations. Yiannis Paraskevopoulos, managing director at Davos & Associates which contributed to the CB Richard Ellis study, said demand in less expensive areas continued to be high. «Companies’ relocation to other regions within the Attica basin is part of their efforts to cut operating costs. A fair number of businesses are seeking to relocate to areas where rents are low. Property prices have in addition suffered from the spread of financial tools such as sale and leaseback methods, with a number of major companies adopting this method.» Falling prices are also due in part to new office space coming onto the market. Demand, however, is expected to pick up in the next half of the year as foreign institutional investors start buying up property. Currently, at least 10 investment companies, among them Pricoa, GE Capital and AIG, are sounding out the Greek market. The majority of these companies are interested in office space as this offers a steady source of revenues and value in the future. It is a fact that the present economic situation does not allow for high prices. The market in turn has responded to this. An example of this is the decline in average office rent along Kifissias Avenue, falling from 12,000 drachmas per square meter at the beginning of the year, to 9,000-10,000 drachmas per square meter. The general economic climate, especially after September 11, has affected office rent in the majority of European capitals. With the exception of London, Madrid and Barcelona, all other capitals have reported a significant drop in office rental costs. Office space in Paris is now cheaper by 8.6 percent, in Stockholm by 7 percent, in London’s West End by 5.9 percent and in Munich by 5.7 percent. CB Richard Ellis’s survey showed that the largest declines were in areas which had reported the biggest increase in the last two years. In Athens, new office space is expected to become available in the coming months, both in prime and developing areas. Property developer Babis Vovos is scheduled to open new buildings along Kifissias Avenue at the Attiki Odos intersection, in Halandri and in Ambelokipi. Hermes Real Estate is also due to open new office buildings along Soutsou Street in central Athens and at Plato’s Academy in western Athens. The ministries’ relocations are also expected to have an impact on the property market as this will free up valuable space in central Athens and could possibly to lower office rental costs in the city.