Yields on Athens prime commercial property climbed this year as pessimism over Greece’s economy and the prospect of banks selling assets depressed real estate values, according to Colliers International.
Yields on the best office properties in the Greek capital rose to 8 percent this year from 6.9 percent in 2009 and prime shopping-mall yields increased to 8.5 percent from 6.3 percent, said Ana Vukovic, the broker’s managing director for Greece. Yields from income-producing real estate move in the opposite direction of property values.
“Prime yields are moving upwards in 2012 driven by the high cost of money and low availability of capital combined with suppressed demand” and pressure on banks to sell properties to bolster their balance sheets, Vukovic said.
The country’s economic crisis is prompting local businesses, banks and other commercial real estate owners to close stores and branches, opening opportunities to investors. Greece has pledged to raise 50 billion euros from state assets, around half of which is real estate, by 2020 to meet conditions tied to 240 billion euros in foreign aid pledged over the past two years.
Prime office vacancy rates in Athens doubled to 16 percent this year and rents fell to about 21 euros per square meter a month from 32 euros per square meter in the peak, according to Colliers. Prime retail rents fell to 150 euros per square meter a month, from as much as 280 euros per square meter a month at the peak in 2006 and 2007.
By comparison, yields for commercial property in the City of London financial district were unchanged for the 12 months through June at 5.25 percent, according to Jones Lang LaSalle Inc. In London’s West End, prime yields for sites valued below 10 million pounds were stable at 4 percent, the Chicago-based broker said in a report.
Greek gross domestic product may drop 3.1 percent in 2013 and 0.3 percent in 2014, according to Bloomberg survey released on Oct. 1. With the economy heading for its sixth year of recession, companies may continue to shed jobs even with unemployment at 25.1 percent, the highest in the euro zone.
Greece is overhauling its banks after they sustained losses on domestic government bonds in the country’s debt swap, the biggest restructuring in history. Greece obtained a 130 billion-euro bailout in March from the European Union and the International Monetary Fund that earmarked 50 billion euros for recapitalizing lenders.
Colliers, based in Seattle, predicts prime commercial property yields will stabilize next year as Greece pays down debt, sovereign risk abates and investor appetite picks up as the government introduces fast-track legislation to make investing in state property easier.
Greece’s state asset-sales fund last month chose a Lamda Development SA unit to lease the International Broadcasting Center in Athens for 90 years. Lamda made an 81 million-euro bid in a public tender in the first real estate privatization in the country’s plan to raise about 25 billion euros from the sale or lease of public property. Colliers, based in Seattle, provided an independent valuation of the property.
“This first privatization deal is expected to speed up privatization projects and plans, sending a message for a business friendly framework that can upgrade the role of Greece and its potential for economic recovery,” Vukovic said.
The broadcast center was built for the 2004 Olympic Games and includes the Golden Hall shopping mall with a total area of 132,200 square meters (1.4 million square feet) and an additional vacant area of 21,600 square meters.
Greece’s Hellenic Republic Asset Development Fund in December started a public tender process for a majority stake in Hellinikon SA, the company with the right to manage and develop Athens’s former international airport under a long-term lease that covers 6.2 million square meters of land. Last month, the fund chose Qatari Diar Real Estate investment Co., London & Regional, Elbit Cochin Island Ltd. and Lamda Development for the second round of bidding to buy a majority stake in Hellenikon.