For the first half of 2015, Greece’s path towards economic recovery still remains enigmatic. For the past six months Greece’s new anti-austerity coalition government, between the radical left Syriza party and the right wing Independent Greeks party has entered into prolonged negotiations in an attempt to reach a more favourable debt relief agreement with less austerity. The Greek economy is expected to contract by 0.1% in 2015.

^{Source: Savills European Research}

The above have hindered the investment environment for real estate which has been evidenced by low investment volumes, below initial expectations for 2015. Recorded investments in Greek commercial properties have amounted to a total of €42m. This volume mainly comprises the purchase of two large retail units (Big Boxes) by Grivalia Properties REIC and the sale of a historic / trophy hotel in Athens’ North, Pentelikon to a Greek expat with an appetite for pursuing further investments in Greece. Worth mentioning is that Grivalia Properties REIC and Sklavenitis SA, one of the leading supermarket chains, have reached an agreement on the sale of the owner occupied Makro wholesale stores for a price of €65m. The deal is expected to be completed by September 2015.

Additionally, we have observed an increasing interest from opportunistic funds and private offices to acquire large portfolios of either repossessed assets or non-performing loans which have real estate assets as collateral. We can refer to the cases of Piraeus Bank and Eurobank who are seeking investors in the market. Also, the Bank of Cyprus was in the market for the sale of a number of investment properties. We understand that the rest of the Greek systemic banks are very likely to follow the same route in order to increase their liquidity.

^{Source: Savills European Research}

The recovery of investment sentiment for the remainder of 2015 will primarily depend on the return of business confidence and on increasing the pace of structural reform implementation. The domestic players with high levels of liquidity (REICs) are expected to continue playing a role in the stabilisation of the real estate investment market. We are also of the opinion that interest for investments in the Greek property market will be expressed by foreign investors who have strong expectations of a recovery within 2016, hence investing in sectors where returns are promising enough.

Again, Athens and Thessaloniki are expected to attract the highest investment volumes for the remaining of 2015. In terms of real estate sectors, we believe that offices are expected to attract most of the investment interest, as it will be directly linked to Greece’s recovery. Although, it is very difficult to estimate the current level of yields due to the lack of significant investment activity, especially from foreign investors, we are of the opinion that Grade A offices in prime business locations (Athens CBD, Kifissia’s Avenue etc.) could reach gross initial yields in the order of 8-9%.