The logic of the saying "Invest in real estate, they're not making any more" has never been more apparent in Greece than in the past few years with the meeting of EMU convergence criteria, the awarding of the 2004 Olympic Games, and the influx of billions of euros into the economy, led by the third community support framework funds.

Is Real Estate 
The Next
Best Thing?
BY RAYMOND MATERA

Posted with special permission granted
by
The American Hellenic Chamber of Commerce


Real estate in Greece never played quite the same role it has in many other countries, mainly due to legislative limitations and dissuasive banking regulations. Now, as the country liberalizes its financial framework and mortgages and lending become more user friendly, the real estate market is approximating other western models and being transformed into a dynamic growth sector. Although the heady environment for real estate growth that welcomed the millennium has been tempered by the economic pullback globally, the Greek real estate market is still being sharply honed and transformed on a variety of fronts. Extensive infrastructure projects throughout the country are redefining attractive residential and retail areas, influencing prime office locations, and realigning industrial bases in what is a major shakeup in the market.

CATALYSTS OF CHANGE

In Athens, the Attiko Metro played a major role in shifting transportation hubs and assigning new values to areas and neighborhoods. Locations with ready access to the Metro suddenly became far more attractive to commuters. The new airport at Spata, together with the Athens Ring Road connecting western and eastern Attica, are creating an entire shift in office, hotel and commercial demand, creating a new northern development axis in one fell swoop. And, the 2004 Olympic Games are causing unprecedented diversions by transforming entire areas, local infrastructures and transportation nodes that will have a long lasting impact on the real estate scene. At the recent MIPIM Real Estate Exhibition in Cannes, France, held March 12-15, the Greek presence "has been concentrating on three areas this year – Maroussi, Patras and Thessaloniki – each of which is experiencing profound change," according to official reports. Exhibition literature says that "the Municipality of Maroussi will be given a huge boost by the Olympic Games as 75% of spectators will pass through turnstiles within its boundaries. Maroussi is also the financial center of Athens and last year was given a BBB credit rating by Standard & Poor."


Elsewhere in the country, major projects and politico-economic developments are creating a new climate that is having a profound effect on many areas, some unchanged for decades. As Thessaloniki assumes its role as capital of Balkan development and reconstruction, it itself is undergoing a major reconstruction. Reports circulated at the MIPIM conference stated that "Thessaloniki will probably be the greatest beneficiary of infrastructure investment in Greece. It will re-emerge as a gateway to the east with the redevelopment of the old Roman Ignatian Way (Egnatia Odos) that will link the west coast of Greece to the Turkish border. Its airport will also eventually be redeveloped as a hub." The Egnatia Odos, one of the most ambitious construction projects in Europe, is creating a new transportation axis in Southeast Europe that will spur a wide variety of building and commercial activity, including warehouses, industrial zones, hotels and restaurants, shopping centers, and new residential areas.

To the south, transportation is also playing a pivotal role in effecting change and development. With Patras as its gateway, the Peloponnese is being more widely opened up with the construction of the Rio-AntiRio Bridge. And, there is a mixed redevelopment of the port area under way which will be completed by 2004. Patras is also developing a Formula-1 standard motor racing track on a 1.25 million square meter site outside the city.

NEW DIRECTIONS

Real estate has always had a significant influence on demographics, if not at times the other way around. A major development – shopping center, new residential area, entertainment hub – can initiate an entire displacement in towns and cities, changing the essential character of an area. In Boston, the renovation and development of the waterfront and Faneuil Hall forever changed a whole section of the downtown. The same happened in London at Canary Wharf, at the Baltimore waterfront, and countless other areas.

As Greece begins a new chapter in development, certain projects are bound to have striking effects and create substantial opportunities. The public and private sectors are about to enter a new era of business relationships that will exploit some of the country's most attractive land.

According to George Zygoyiannis, chairman of the Greek Public Real Estate Corporation (KED), "opportunities for inward investment have also improved since all regulations on foreign ownership were finally removed last year." KED has the largest real estate portfolio in the country, with more than 100,000 properties, and plans to sell assets by the end of 2002 that will net more than $120 million. Total revenues from its public sector services accounts are expected to exceed $800 million during the 2000-2004 period.


Hellenic Tourist Properties (ETA), which currently operates 300 pieces of property, also aims to attract private capital in jointly developing properties. According to Tassos Chomenides, ETA's Managing Director, one of its assets selected for priority development is Afantou on Rhodes, a project that entails “substantially upgrading the existing golf course facility and the construction and operation of new related facilities (a second golf course, a golf academy, deluxe hotels and luxury tourist villas) with the aim of substantially improving the property. The investment is expected to reach €100-150 million.

The most significant project to be carried out under the auspices of ETA is the hybrid theme park to be built at Anavissos, outside Athens – the development of a Greenfield area covering 1,670,000 square meters, along both sides of the Athens-Sounio national road from the 48th to the 53rd kilometers. The theme park, whose investment is expected to reach up to €300 million, will be based on Greek mythology and will include a variety of facilities – hotels, conference centers, sports and leisure properties, and provisions for marine activities.

Mega infrastructure developments, Olympic Games projects, and the economic upturn of the last decade also have a strong influence on prices for the existing stock of properties, including office, retail and industrial properties. The office and retail market started to become ember hot at the beginning of 2000, with expectations by many that the trend would continue up to 2004. But, according to recent studies, the market pulled back sharply during late 2001 and is in a wait-and-see phase at the moment.

OFFICE SPACE

According to Stelios Pikis, Head of the International Department of Danos & Associates S.A. in association with CB Richard Ellis in Athens, "office space in the capital covers about 8 million square meters, about 30% of which is in the center, 20% along Syngrou Avenue, and 25% along Kifissias Avenue. The Attiki Odos region is receiving the most attention for new office space, and to a lesser extent the previous industrial area of Piracus Avenue, Thivon, Kifisou, and Kavala Avenues." Mr. Pikis says that after two years of rising prices, "investors are now finding asking prices unreasonable," although there is indeed a higher demand for larger offices and new government premises.

LEADING INDICATORS

Kifissias Avenue, according to Mr. Pikis, once the most popular destination for offices, is facing about a 20% decrease in prices, especially for older buildings. Rental prices are averaging about €30/m2, with older properties reaching 50-60% of new buildings. Although Vasilissis Sophias commands the highest rents currently (€42/m2), areas leading to the airport are picking up the most momentum. The Michaelokopoulou area has seen skyrocketing prices during the past year, due to its proximity to the Metro and centrally convenient locations.


The American Hellenic Chamber of Commerce, is a non-profit, self-supporting organization, and was established in 1932 to promote economic and business relations between the United States and Greece. With a corporate membership today of some 1,000 U.S. companies operating in Greece and major Greek enterprises doing business with the U.S., it continues to encourage and facilitate trade, investments and professional partnerships from both sides of the Atlantic. Additionally, the Chamber is a fully accredited member of the U.S. Chamber of Commerce in Washington, D.C., and affiliated with the European Council of American Chambers of Commerce (ECACC).