Demand for offices boosts property market

2 mins read

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

The property market is backed by a heightened demand for housing projects, but stakeholders report interest in 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 had 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 is at an advanced stage.”

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

According to a Danos report published by Phileleftheros daily, office rental prices in Nicosia range between €12 and €23 per square metre, while in 2020 and 2021, they were between €12 to €20.

Office rental prices in Larnaca are between €8 and €12 per square metre, compared to between €6 and €10 in 2020.

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

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

In Larnaca, office space prices in 2022 are €2,000 to €3,000, higher than they were in 2021 (€1,500 to €2,000).

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

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

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

Larnaca rental prices are €6 to €20 — the same levels as 2020.

Limassol shop rental prices are €20 to €45 per sqm, also stable since 2020.

Famagusta shop rental prices are €10 to €25 per sqm, while in 2020 and 2021, they were between €8 and €20.

In Paphos, shop rental prices have remained stable since 2020, ranging from €10 to €25.

Sale prices of shops in Nicosia range from €4,000 to €5,000 per sqm, in Larnaca from €2,000 to €2,500, in Limassol from f€5,500 to €6,500 and Famagusta it €2,000 to €2,500.

Commercial yield

The promising yield encourages investors to enrich their portfolios with office and commercial properties.

For 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, its 5% to 6%.

In Paphos, the rental yield on shops and offices is 5.50% to 6.50%, and in Famagusta, the yield is 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 on its duration.

The construction sector is also expected to suffer the consequences of the slowdown, mainly due to the increased cost of building materials and transportation.

“Insecurity leads to freezing 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,” said the report.

Some large development projects underway in Nicosia and Limassol provide an additional level of security and incentive to investors in real estate to protect their portfolios from high inflation.