Financial Mirror (Cyprus)

Demand for offices boosts real estate market

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Cyprus’ real estate sector is proving to be remarkably resilient, shrugging off the effects of hiking inflation, as demand for housing units and office space continues to grow.

The property market is mainly backed by a heightened demand for housing projects, but stakeholde­rs report that interest for high-end office space has also taken off.

In comments to the Financial Mirror, Loucas Georgiou, Head of Property Studies & Valuations at BNP Paribas/ Danos Real Estate, said the market for office and commercial properties has seen solid demand despite pressures from soaring inflation.

“The war in Ukraine has pushed up the cost of living and businesses’ operationa­l costs, however, at the same time it is also powering the increase in interest for office and commercial space, as many companies, previously based in Ukraine, are eyeing Cyprus as an alternativ­e base,” said Georgiou.Despite pressures on the market, demand for offices has been high, keeping prices stable since 2020.

“A number of high-end office buildings will be coming online soon, while work on other projects are at an advanced stage.”

Georgiou said the bulk of demand for office is still in Limassol, but the capital is picking up as sone of high-tech companies have landed in Nicosia.

According to a Danos report, published by Philelefth­eros daily, office rental prices in Nicosia range between EUR 12 and EUR 23 per square metre, while in 2020 and 2021 they were between EUR 12 to EUR 20. Office rental prices in Larnaca are between EUR 8 and EUR 12 per square metre, compared to between EUR 6 and EUR 10 in 2020.

In Limassol office rental prices are between EUR 20 and EUR 45 per square metre, in Famagusta they range between EUR 5 and EUR 12 and in Paphos from EUR 7 to EUR 10.

The sale prices of offices in Nicosia are from EUR 3,000 to EUR 4,500 per sqm, while in 2020 and 2021 they were between EUR 3,000 to EUR 4,000.

In Larnaca office space prices in 2022 are EUR 2,000 to

EUR 3,000, higher than they were in 2021 (EUR 1,500 to EUR 2,000).

The Limassol sales price for offices is EUR 5,000 to EUR 6,000 per sqm, in 2021 it was EUR 4,500 from EUR 6,000.

Famagusta prices range from EUR 1,500 to EUR 2,000 and in Paphos it’s between EUR 1,500 to EUR 2,500.

For commercial properties, shop rental prices in Nicosia are EUR 15 to EUR 45 per square metre, stable since 2020.

Larnaca rental prices are EUR 6 to EUR 20 — the same levels as 2020. In Limassol shop rental prices are EUR 20 to EUR 45 per sqm, also stable since 2020.

Famagusta shop rental prices are EUR 10 to EUR 25 per sqm, while in 2020 and 2021 they were between EUR 8 and EUR 20. In Paphos, shop rental prices have remained stable since 2020, ranging from EUR 10 to EUR 25.

Sale prices of shops in Nicosia from 2020 to 2022, range from EUR 4,000 to EUR 5,000 per sq.m, in Larnaca from EUR 2,000 to EUR 2,500, in Limassol from EUR 5,500 to EUR 6,500 and in Famagusta from EUR 2,000 to EUR 2,500.

According to the Danos report, investors are encouraged to enrich their portfolio with office and commercial properties by the promising yield offered.

As explained in Nicosia the yield on shop rents is between 6% to 6.5% and ranges from 5% to 6% for offices.

In Limassol, the yield for both offices and shops is between 5% and 5.50%.

In Larnaca the rental yield for shops is from 5% to 5.50% and for offices from 5% to 6%. In Paphos the rental yield on shops and offices is from 5.50% to 6.50% and in Famagusta the yield in both categories is between 5% to 6%.

As noted in the Danos reports, the extent to which the war in Ukraine will affect the domestic real estate market will depend significan­tly on its duration.

It further notes that the constructi­on sector is also expected to suffer the consequenc­es of the slowdown, mainly due to increase in the cost of constructi­on materials in combinatio­n with significan­t increased transporta­tion costs.

“Insecurity is leading to the freezing of major projects, and temporary postponeme­nt of foreign investment. Strong inflationa­ry pressures are increasing­ly turning investors to real estate markets as a hedge against a possible further burst of inflation” notes the report.

As it notes, a number of large developmen­t projects underway in Nicosia and Limassol provide an additional level of security and incentive to investors to turn to the real estate market to protect their portfolio from the inflation crisis.

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