CYPRUS: Nicosia sees revival in commercial property sector

10 mins read

Cyprus’ capital is showing signs that its commercial property market is following similar growth recorded in its residential sector, as local and foreign investors seek opportunities, while companies are searching to house their operations.

Stakeholders in Nicosia’s real estate market are pleased as they see new commercial properties being built, while interest is growing for existing commercial buildings.


Real estate stakeholders are confident that although not comparable to the boom in residential properties, we are at the beginning of an upward trend.


Nicosia is set to see another tower added to its skyline, as works on the 20-story Labs Tower in the centre of the town picks up speed. Construction started in 2018 and is expected to be completed by mid-2020.


The Labs Tower, which is to stand 90 meters tall once completed, covering an area of 13,000 sqm, is estimated to cost EUR 25 million, while equipment added to flats and offices will cost another 25 million.


Commercial properties on Nicosia’s main arteries have seen demand for shops and offices pick up, with prices varying between EUR 3,000 and 4,500 per square metre, said Andreas Sergiou, head of the Underwriting Department for Delfi Partners.


Sergiou said that investors, both local and foreign are drawn in by lower rents than Limassol and higher returns compared to deposits and state bonds.


Interest in Nicosia's commercial properties is mainly concentrated in some of its major streets, such as Limassol, Makarios, John Kennedy, Grivas Digeni, Acropolis and Strovolos Avenues.


“Investors looking to buy commercial property in Nicosia are eyeing the centre of the city and specifically in the triangle created by Makarios Avenue and Stasikratous Street as well as Ledra and Onassagorou streets, the two main streets of the old city within the Venetian Walls.”


Business investors who acquire real estate for tourist, business or industrial purposes are attracted mainly by various tax incentives.


Sergiou said Cyprus’ fiscal performance during the past three years has drawn the attention of foreign investors with a number of investment opportunities.


“Growth in areas such as tourism, combined with developments regarding the recent discovery of large natural gas deposits in Cyprus’ EEZ, has increased interest in offices.”


Regional business centre


The Delfi Partner manager noted that Nicosia has the potential to become a regional business centre.


“The office market in Nicosia already hosts many local and international headquarters of multinational corporations such as Exxon Mobil, GlaxoSmithKline, Lukoil, Samsung, EKO, BP, AIG, Microsoft, Oracle and many other international blue-chip companies”.


Furthermore, the strategic positioning of Cyprus in the eastern Mediterranean, at the crossroads of Europe, Asia, the Middle East and Africa adds value to the above while all-year sunshine and the high level of professional services play their own part.


“Moreover, the fact that Cyprus is a member of the European Union, the credible and transparent legal framework, the excellent infrastructure combined with reliable communication with all parts of the world, the relatively low cost of living and high-quality of life are positive factors for investors.”


Sergiou explained that a number of foreign investors from the Middle East are interested in Nicosia’s commercial real estate.


George Mountis of Delfi Partners said that one of the incentives for companies seeking to house their offices in Nicosia is that rents are a lot lower than in a booming Limassol.


“Prices of offices and shops are up to 80% lower than those on the coastal road of Limassol and 30% on average.”


He added that another reason behind foreign investors and companies eyeing Nicosia office space are the high-quality private schools which teach in English, located in the city.


Loucas Georgiou, head of Advisory for DANOS / BNPPRE, said that the capital’s commercial sector is banking on the overall recovery of the Cyprus economy.


“Due to the recovery of the Cypriot economy, there has been a steady and simultaneous rise in demand for real estate to house commercial and business activity, especially in recent months, thus bringing about a rise in demand for both offices and shops,” said Georgiou.


This is due both to foreign and local investors who, taking advantage of the country's fiscal welfare, want to play an active role in the growth of the economy and are looking for real estate to house their businesses in prime areas.


“Demand for offices continues to be focused on income-producing assets, rather than empty properties.”


Georgiou believes that now would be a good time for investors to back commercial property in the capital.


“Investing in real estate was always the safest investment one could make. But due to an increase in demand, commercial properties could offer investors a more attractive return than having money sitting in a bank somewhere.”


“Investors are also attracted to invest in Nicosia’s commercial properties as the offices of major international authorities and companies are located in the capital. Also, almost all government agencies such as ministries and departments of government agencies are located there.”


Georgiou said that while traditionally, interest for commercial properties was concentrated on Makarios and Stasikratous Avenues, investors seek properties on main arteries outside the city centre such as Severis and Limassol Avenues.


With the completion of works in Eleftheria Square, interest for commercial properties in the heart of the city are expected to increase.


Georgiou believes that interest in older commercial property will see regeneration and owners prompted to refurbish their properties.


A word of caution


Chairman of the Cyprus Property Owners Association, George Mouskides, stressed that the increase in demand for commercial property is parallel to the recovery of the economy, as businesses are in a better position to rent property, while new companies are also making their appearance.


However, he is concerned over the plethora of empty shops which will remain unwanted for yet some time, especially in downtown Nicosia. “With the creation of the latest malls, there is a lot of empty retail space.”


“Not to undermine the movement in the market, we need to be cautious when talking about the magnitude of the growth in the sector,” said Mouskides.


“We must keep in mind that due to the growth of the economy; a number of businesses are now able to upgrade their offices and are looking to move, showing a preference for newer offices. This creates a plasmatic movement in the market,” he added. 


He sees an increase in demand for offices in the old city centre could be in the cards with the upgrade of the area.


Mouskides urged the government to put forward a series of incentive packages for owners of old buildings in the centre to renovate them so they can be offered to companies wanting to set up their office in Nicosia’s centre.


“This would mean incentives to renovate buildings, and the creation of multi-story parking lots to alleviate traffic and parking problems.”