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crisis that evolved in 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 an average 3% in 2009-2011 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 office and industrial sub-sectors, 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 and third time, in mid- and late 2010, they indicated that rents have stopped falling. However, they indicated that most rents will continue to decline – if only marginally – in 2011.
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.
Our 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 gradually through the forecast period.
source: Business Monitor International
