Greece Real Estate Report Q4 2010
Includes 3 FREE quarterly updates
In spite of the massive crisis that evolved through late 2009 and early 2010 when investors lost confidence in the Greek government’s ability to service and roll over its bonds, Greece has not suffered a sharp recession. Rather, the main impact of the crisis is that the economy should shrink by around 2% in each of 2009 and 2010 before returning to a trend of (very) sub-par growth.
Political problems have contributed to a sharp fall in rents – in Athens, Piraeus and Thessaloniki – across all three sub-sectors (office, retail and industry). Our sources in the three cities suggest that rental rates dropped by 20-30% across the board during 2009. The global financial crisis and the development of new property have also contributed to this fall in rents.
Nevertheless, there is not a commercial property glut in Greece. Vacancy rates are 10% in the Piraeus industrial sub-sector, but lower everywhere else. New projects that are becoming available to tenants should command superior rents.
When we interviewed our in-country sources for a second time, in mid-2010, they indicated that rents have stopped falling. Further, they indicated that rents should actually increase – if only marginally – in 2011. This outcome is consistent with what our sources were expecting when we interviewed them in early 2010 and is better than what we had expected.
Nevertheless, the main issue is that, in a country where the authorities do not have the scope to devalue, and where brutally austere fiscal policies will crimp domestic demand for the foreseeable future, the process of adjustment to the crisis must involve still-lower reduced capital values and property prices. This will be the case whether or not rental rates have stopped falling.
BMI’s forecasts assume that rents will move sideways or downwards, and that there will be an even greater fall in capital values and prices. Accordingly, we are looking for net rental yields to rise steadily.
Key Features Of This Report
This is the latest edition of a new series of industry reports published by BMI that seeks to identify the key dynamics of the real estate sectors of 44 countries around the world, some of which are developed and some of which are, in every sense, emerging markets. Once again, the questions that we seek to answer for each country remain as follows: What are the main issues that will matter to actors in and around real estate development in the country concerned, both over the long and the short term? What are the main constraints that they face? What are the key insights that one garners when one compares the real estate sector of the country concerned with its peers in other countries?
In Q3 we have introduced a very substantial new improvement to the reports. We have incorporated data and qualitative observations provided to us by commercial real estate agents operating in the countries we survey. As a result we have gained a much clearer picture of the balance between demand and supply in each of three main sub-sectors – office, retail and industrial. We have also introduced a new approach to the forecasting of rental yields, which is discussed in the methodology sector of this report.
In Q4, we have incorporated a lot of new data in relation to rents and yields in 2010. We gained this data by way of a new round of interviews with our in-country sources in mid-2010. In some cases, the latest information from our sources has caused us to make significant revisions to our forecasts for 2011-2014. We asked our sources to indicate what growth in rents is likely for 2011. We explain their answers in the Forecast Scenarios.
In spite of the massive crisis that evolved through late 2009 and early 2010 when investors lost confidence in the Greek government’s ability to service and roll over its bonds, Greece has not suffered a sharp recession. Rather, the main impact of the crisis is that the economy should shrink by around 2% in each of 2009 and 2010 before returning to a trend of (very) sub-par growth.
Political problems have contributed to a sharp fall in rents – in Athens, Piraeus and Thessaloniki – across all three sub-sectors (office, retail and industry). Our sources in the three cities suggest that rental rates dropped by 20-30% across the board during 2009. The global financial crisis and the development of new property have also contributed to this fall in rents.
Nevertheless, there is not a commercial property glut in Greece. Vacancy rates are 10% in the Piraeus industrial sub-sector, but lower everywhere else. New projects that are becoming available to tenants should command superior rents.
When we interviewed our in-country sources for a second time, in mid-2010, they indicated that rents have stopped falling. Further, they indicated that rents should actually increase – if only marginally – in 2011. This outcome is consistent with what our sources were expecting when we interviewed them in early 2010 and is better than what we had expected.
Nevertheless, the main issue is that, in a country where the authorities do not have the scope to devalue, and where brutally austere fiscal policies will crimp domestic demand for the foreseeable future, the process of adjustment to the crisis must involve still-lower reduced capital values and property prices. This will be the case whether or not rental rates have stopped falling.
BMI’s forecasts assume that rents will move sideways or downwards, and that there will be an even greater fall in capital values and prices. Accordingly, we are looking for net rental yields to rise steadily.
Key Features Of This Report
This is the latest edition of a new series of industry reports published by BMI that seeks to identify the key dynamics of the real estate sectors of 44 countries around the world, some of which are developed and some of which are, in every sense, emerging markets. Once again, the questions that we seek to answer for each country remain as follows: What are the main issues that will matter to actors in and around real estate development in the country concerned, both over the long and the short term? What are the main constraints that they face? What are the key insights that one garners when one compares the real estate sector of the country concerned with its peers in other countries?
In Q3 we have introduced a very substantial new improvement to the reports. We have incorporated data and qualitative observations provided to us by commercial real estate agents operating in the countries we survey. As a result we have gained a much clearer picture of the balance between demand and supply in each of three main sub-sectors – office, retail and industrial. We have also introduced a new approach to the forecasting of rental yields, which is discussed in the methodology sector of this report.
In Q4, we have incorporated a lot of new data in relation to rents and yields in 2010. We gained this data by way of a new round of interviews with our in-country sources in mid-2010. In some cases, the latest information from our sources has caused us to make significant revisions to our forecasts for 2011-2014. We asked our sources to indicate what growth in rents is likely for 2011. We explain their answers in the Forecast Scenarios.
Contents
Executive SummarySWOT Analysis
Greece Real Estate/ Construction SWOT
Greece Economic SWOT
Greece Business Environment SWOT
Regional Real Estate Overview
Table: Central And Eastern European Office Markets At A Glance – Rents, 2009-2011 (EUR per m2 per month)
Table: Central And Eastern European Retail Markets At A Glance – Rents, 2009-2011 (EUR per m2 per month)
Table: Central And Eastern European Industrial Markets At A Glance – Rents, 2009-2011 (EUR per m2 per month)
Real Estate Market Overview
Table: Greece’s Real Estate Markets – Rentals, 2008-2009 (m?/month, EUR)
Table: Greece’s Real Estate Markets – Net Yield, 2008-2009 (%)
Table: Greece’s Real Estate Markets – Terms Of Contract/Lease
Table: Greece’s Real Estate Markets – Available And Vacant Space
Forecast Scenario
Real Estate Outlook
Table: Greece’s Real Estate Markets – Rentals, 2009-2011 (m? per month, EUR)
Table: Greece’s Real Estate Markets – Net Yield, 2008-2014 (%)
Construction Industry Outlook
Table: Greece’s Construction And Infrastructure Industries, 2008-2014
Macroeconomic Outlook
Table: Greece – Economic Activity, 2007-2014
Business Environment
Real Estate/Construction Business Environment Rating
Table: Europe Real Estate/Construction Business Environment Rating
Western Europe Project Finance Ratings
Table: Design And Construction Rating
Table: Commissioning And Operating Rating
Table: Overall Project Finance Rating
Business Environment
Table: BMI’s Developed States Business And Operation Risk Ratings
Table: BMI’s Developed States Legal Framework Ratings
Table: Developed States – Labour Force Quality
Table: Annual FDI Inflows Into Central And Eastern Europe And Central Asia, 2006-2008
Table: BMI’s Developed States Trade And Investment Ratings
Company Monitor
Babis Vovos International Construction
LAMDA Development
PASAL Real Estate Development
BMI Methodology
How We Generate Our Industry Forecasts
Construction Industry
Bank Lending
Real Estate/Construction Business Environment Rating
Table: Weighting Of Indicators
Project Finance Ratings Indicators
Table: Design And Construction Phase
Table: Commissioning And Operating Phase – Commercial Construction
Table: Commissioning And Operating Phase – Energy And Utilities
Table: Commissioning And Operating Phase – Transport
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