2014-01-26 15:50:51 - Fast Market Research recommends "Greece Real Estate Report Q1 2014" from Business Monitor International, now available
The depression in the Greek commercial real estate sector appears to be finally bottoming out with the market expected to undergo a certain degree of stabilization in H213 and into 2014. A marginally improved macroeconomic outlook, coupled with an upturn in investor activity are the main reasons to be optimistic going into 2014, though we caution that the sector remains plagued by weak demand and falling prices, both of which are several years away from returning to pre-downturn levels.
With a focus on the country's principal cities of Athens, Thessaloniki and Piraeus, the Q114 Greece Real Estate report covers rental market performance in terms of rates and yields across the commercial office, retail and industrial sectors. Our core scenario of rents
remaining stable over H213 remains in place and we expect rental rates to retain their year-end levels going into 2014. The industry remains fragile, however, and should further economic distress emerge, over the course of 2014 such as a disorderly default, market contraction will be prolonged. The one area of upside is for the second largest city, Thessaloniki, where our in-country sources believe that there may be some scope for growth in the rental market.
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While the government has overcome a number of obstacles, a return to sustainable growth is predicated not just on successful economic reforms, but also on targeting policies at future growth industries and restoring confidence in the market. The short-term outlook for the real estate sector is not likely to restore investor confidence. The risks for the real estate sector as a whole are therefore firmly weighted to the downside, though there are signs that larger investors are starting to find their way back into the market to take advantage of the devaluation of real estate assets over the past few years. Foreign investors are currently behind the bulk of all transaction activity.
* Q4 saw a pick-up in investment activity, lead by UK-based Invel Real Estate Partners', acquisition of a 66% state in Greece's largest real estate investment company, Pangaea for EUR653mn. The company owns and manages the majority of the real estate assets belonging to the National Bank of Greece, including the majority of the bank's branches and office space.
* A major transaction in the hotels sector was the EUR400mn sale of the Astir Palace Resort in Greece to Saudi Arabian investment firm AGC Equity Partners, in partnership with Turkey-based Dogus Group. The purchase was undertaken by ACG subsidiary Jermyn Street Real Estate Fund, which will take ownership of 90% of shares in Astir Palace's property portfolio, which includes the Westin Hotel in and the Arion resort and hotel complex, which are both located in Athens.
* The government has passed a new unified property tax, which is expected to come into effect in Q114. While the finer details of the tax have yet to be confirmed, the levy will apply to all forms of real estate including commercial property, residences and land plots. It is estimated that the tax will affect over 6mn property owners and will boost government income by around EUR3bn annually. The unified property tax will consolidate and replace the FAP (current annual charges for property owners),
Key BMI Forecasts
* The office real estate sector is forecast to stabilize in H213. Rental rates in Athens will be fixed at their current value and an increase of 4.7% and 4.4% is forecast for Thessaloniki at the minimum and maximum end respectively.
* The retail sector will also see rates remain close to H113 levels in the second half of the year. Thessaloniki will be the only city for which an increase in rents is expected. We forecast average minimum rents for the city to grow by 4.2% while at the maximum end rents are forecast to increase by 5.5% over H113 levels.
* The industrial segment will be unchanged in terms of rental rates in H213 with rents forecast to remain fixed at both ends of the market across Athens, Thessaloniki and Piraeus. The outlook for 2014 is much the same with no increase forecast for any of the locations we monitor.
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