If you have a certain amount of money that you wish to invest in real estate, the most obvious option is to purchase property.
Although this is the most popular method among private investors for generating rental income, some people argue that investing in commercial properties—such as small manufacturing facilities, warehouses, beauty salons, shops, or offices—can be more profitable. Renting out such properties often yields higher returns than residential rentals, especially during the post-COVID boom in entrepreneurial activity, and the payback period for these investments is typically shorter.
Experts have noted that street retail in the Cypriot rental market offers quite good returns. In city centers, the average yield can reach 8-10%, while in outlying areas it ranges from 10-12%, with a payback period of 10 to 12 years. However, since every building is unique, it is impossible to calculate an absolute return rate for street retail.
At the same time, renting out residential properties in Cyprus generally offers a significantly lower profit. Short-term rentals yield owners an annual return of 7-8%, long-term rentals provide 4-5%, and during the peak season, this can rise to a maximum of 10%.
Apart from the payback period and cost, commercial properties have other advantages. First and foremost, commercial spaces typically involve fewer maintenance issues, as tenants often cover the costs of renovations and make modifications to the space according to their preferences. When it comes to residential properties, the landlord is usually responsible for maintenance and repairs.
However, it’s important to understand that commercial properties are more complex investments than apartments. Success in this market depends on several factors: the surrounding environment, layout, intended use (services, retail, office spaces, etc.), transportation accessibility, availability and number of parking spaces, and location. Sometimes, the absence of just one of these factors can make purchasing a property unprofitable. Therefore, thorough calculation and consideration are essential before making a purchase.
3 Reasons to Invest in Commercial Real Estate in Cyprus:
- Fast-Track Permanent Residency through Investment: Buyers of both commercial and residential properties can participate in this program. By purchasing an office building worth over €300,000, you gain the right to apply for permanent residency. Moreover, your spouse and dependents, including parents and financially dependent children (up to the age of 28), are eligible to participate in the program. You can also reclaim your investment after five years by selling the properties acquired under this program.
- Wide Range of Commercial Real Estate for Various Business Sectors: Cyprus offers a diverse selection of commercial properties suitable for launching different business ventures.
- One of the Lowest Tax Regimes among European Countries: With a corporate tax rate of 12.5%, Cyprus is an attractive destination for foreign entrepreneurs.
A Wide Selection of Commercial Properties on the Cyprus Real Estate Market
The most sought-after properties are those intended for cafes, grocery stores, pharmacies, and beauty salons. In rapidly developing suburbs and new neighborhoods, all types of business activities and services with potential demand from future residents are popular, including clinics, childcare centers, fitness studios, and various shops. Properties in densely populated and high-footfall areas are especially in demand.
Cyprus is a popular relocation destination for IT companies. In 2022, there was a surge in demand for office spaces and office buildings. Developers have increasingly invested in constructing commercial properties with office spaces, leading to a rise in rental prices. Investing in office buildings is a profitable venture in light of the growing demand, providing a stable income.
Features of Commercial Real Estate on the Island
The Cypriot real estate market offers a wide variety of properties with different configurations and layouts, ideal for setting up:
- Entertainment complexes
- Warehouses
- Offices
- Retail spaces
Commercial properties in developing tourist areas are particularly attractive to entrepreneurs and business owners. Acquiring such properties can be a successful investment, as profits from these properties in these locations are increasing annually.
Limassol is particularly popular among commercial property buyers due to its strategic location. It is not only a port city and the “business heart” of Cyprus, but also home to the headquarters of many major companies. Other desirable locations include the tourist resorts of Ayia Napa and Paphos, the capital city Nicosia, and the industrial areas of Larnaca.
Multifunctional buildings that combine commercial and residential spaces are especially favored by investors. When purchasing a property on the island, it’s essential to consider both the geographical location and its surroundings, as well as the most advantageous stage of construction for buying the property. You can invest in commercial properties at the following stages:
- Purchasing an already completed building.
- Investing during the finishing stage.
- Buying property at the start of construction.
- Acquiring a property after the building plan has been approved, but before construction begins (off-plan).
Purchasing a commercial building at an early stage can save you around 30% of the final price. Therefore, if you have enough time and funds, this investment option could be worthwhile. However, rental income from the building will not be immediately available.
Our company’s specialists can help you find commercial real estate tailored to your needs. Contact us, and we will gladly consult with you and offer high-yield properties that are perfect for you.
