Why real estate in Greece is overperforming

The Greek real estate market shows higher rents and stronger yields in all categories compared to Europe, according to leading executives of the real estate market as well as relevant surveys, attracting foreign investment funds of 1.1 billion euros (+39.5%) in the half of 2023 after 2.1 billion euros (+68%) in 2022. At the same time, the Greek Real Estate Investment Companies (AEEAP) also play their own role in Greek real estate, as the value of the properties they own in their portfolios in the last 5 years has more than doubled, reaching 4.6 billion euros in the first half of 2023, according to ETHE data.

The returns

Leading executives of the real estate market believe that Greece is an opportunity for foreign investors, an international hub not only for tourism, but also for logistics, while during the crisis the sector of old detached properties in city centers developed particularly. Yields reach 4-8% for shops, 8-10% for industrial properties, 5-7% for renovated city properties, 6-7.5% for offices and 7-8% for warehouses, returns that are up to 50% higher when there is developer-investor cooperation from the start. The outperformance of Greek real estate, according to research by NBG Securities Research, ranges from 132 basis points to 227 basis points compared to the overall European real estate market, while compared to the more mature European markets (London, Paris, Frankfurt) the outperformance of Athens ranges from 224 basis points to 246 basis points.

They are cheaper

The interest of foreign investors is a consequence of the shortage of stock of commercial real estate compatible with ESG (Environment – Society – Corporate Governance) sustainability criteria, the increased demand from corporate tenants, the appeal of short-term rental accommodation, the demand for residence permits through the “golden visa”, but also of the fact that real estate in Greece is cheaper than its counterparts abroad.

Positive atmosphere

The improvement of the bureaucracy, and specifically of the Land Registry, and the necessity of simplifying the urban planning legislation could contribute to attracting even more foreign investments, while the recovery of the investment grade by the country and political stability have fostered a positive climate no not only to institutional investors from abroad, but also to digital nomads, to those applying for golden visas and to those who want to transfer their tax domicile. On the other hand, Greek AEEAPs have also become more active in real estate development, given the relative lack of ready-made good quality product. Most follow strict ESG guidelines and the largest have issued “green” bonds to finance sustainable investments.

The tank

In the last 5 years, however, according to industry officials, the largest transfer of real estate has taken place in Greece, while it is estimated that approximately 700,000-1,000,000 properties are in the portfolios of red loans and constitute a large pool of properties that will at some point enter the market and they will change the image, just as something similar will happen with vacant properties in public institutions and funds that now remain unused. It is estimated that in the next 5-7 years 250,000 properties will be auctioned, while today there are also 150,000 properties on sharing platforms, while one in 4 households now pay 40% of their income for housing, which is reflected in the rise in rents .

The trends

Demand for commercial and investment properties

The trends emerging in the individual markets are as follows:

Offices: Very high demand is observed for quality offices (bioclimatic, environmentally friendly, energy efficient, technologically advanced, compatible with ESG criteria). Demand for older offices on main roads remains, while demand for older or unrenovated offices is lower. After the pandemic, there is a 40-50% increase in shared spaces, while many companies have reduced their office space by 70%. The space and use of offices is changing, it is no longer used so much for individual activities, but is a space for learning, innovation and connection with the company culture.

Stores: The retail industry has been affected by inflationary pressures, which have affected consumer spending. Due to the dynamic return of tourism, the prices and yields of retail real estate are expected to remain attractive to investors, while there is an increased demand for spaces with specific specifications and based on the health safety of visitor-consumers (the open commercial sub-sector is favored parks, combining entertainment with consumption).

Industrial & storage buildings: Strong demand is seen for storage spaces due to further penetration of e-commerce and digitization of the supply chain, while there is a lack of supply in line with demand specifications. The strategic position of the country makes Greece a hub for data centers, while the demand for smaller storage spaces within the limits of the urban fabric (city logistics and last mile) also increases.

Tourist properties: In recent years, 35-40% of total investments are made in the tourism sector. An improvement of the tourist product is observed with the offer of high-quality infrastructure with the entry of new hotel brands, while on the Athenian Riviera it is estimated that in a few years one will meet a multitude of six-star hotels. In South Attica and on the beach front, properties are available from 7,000 euros/sq.m. up to 20,000 euros/sq.m., with 50% of residential real estate buyers being foreigners, while Athens based on the Hellinikon Business District could also develop into an international business center. The direction is towards the luxury tourist product, while there is great interest in foreign hotel brands entering, as only 9% of brands in Greece are international, when in Italy it reaches 22% and the average in Europe is 45%.