Greece looks to recover from the coronavirus pandemic which has hit, its heavily dependent on tourism and services economy, hard. The Bank of Greece announced that economic growth will reach 4.2 % this year, with growth being particularly strong in the latter half of 2021, higher than the 3.6 % that had been estimated by the IMF. The recovery is expected to be driven by domestic demand, the launch of projects under the National Recovery Plan and an expected increase in tourism receipts compared to 2020. The European Commission approved the Greek Recovery and Resilience Plan (RRP), Greece 2.0, of a total budget of €30.5 billion which aspires to change the Greek growth model. The Plan will support critical investments and reforms and help Greece emerge stronger from the Covid –19 pandemic. Greece’s economic sentiment (ESI) remained broadly stable in June at 108.7, following the sharp rise in May by 10.7 points to 108.6 points, according to European Commission. The Employment Expectations Indicator (EEI) also increased to 112 points, after rising by 5 points to 110.9 in May. Greece’s retail sales index rose by 11.7 percent in June following a revised increase of 14.8 percent in May, as reported by Hellenic Statistical Authority.
Industrial Property Greece
The total contribution of the supply chain sector in Greece exceeds 9%, with 6.3% coming from third party services (3PL), according to data from Eurostat (fixed prices 2010), while the remaining 2.8% concerns in-house logistics. The industrial sector employs about 200 thousand employees and has higher productivity than the country average. The catalyst for the implementation of strategic goals is now digitization and integration of modern technologies in all the functions of the supply chain. The supply chain maintained high levels of efficiency during pandemic in all critical areas and especially in medicine and food.
Occupier demand for logistics property in Greece continues to be particularly strong as e-commerce activity increases. The majority of occupier’s transactions are built to suit and concern newly built properties. While prime rents for large modern assets maintained their 2020 level, yields compressed by 20 bps compared to last quarter of 2020. The continual lack of available Grade A logistics stock has resulted investors to carry out forward purchase transactions. Given the allocation of real estate capital targeting the logistics sector, we anticipate further yield compression through the remaining of the year.
Office Property Athens
Occupiers are more active than last quarter in terms of number of relocation searches and there is strengthening demand, particularly from international tenants. However take up was anemic at current quarter based on projections, reflecting occupiers’ cautiousness when making decisions relating to leasing and owner-occupation and the scarcity of prime offices on the supply side. However a more dynamic second half of the year with stronger take up figures is expected. Development activity continues to rise with speculative schemes in all submarkets. Quality is still the key driver of demand which is coming mainly from Public sector, pharma and technology sectors. The highest level of office take-up was recorded in north East Athens. New decentralized clusters are being created driven by Helliinikon and other major development schemes in the pipeline. The largest relocation announced this quarter refer to the start of construction of new Leed and Well accredited 7,500 sqm offices for Kaizen Gaming (Stoiximan | Betano), expected to be completed till June 2022 by Dimand development company.
Athens's outdated real estate portfolio is holding back investment for core assets albeit increased interest while we notice yield compression for such product. Prime headline rents reported an increase in the 2nd quarter of 2021 reflecting the scarcity of supply of such space and prime yields are expected to further compress supported by the high interest for core product.