In 2026, the Cyprus commercial real estate market is undergoing a period of qualitative transformation, driven by a massive influx of international technology and financial companies. While investors previously focused on the residential sector, today commercial properties are becoming the foundation for building stable and highly profitable portfolios. The “headquartering” strategy, actively supported by the government, has led to an acute shortage of modern office space, making this segment one of the fastest-growing on the island. Investing in offices, retail space, or logistics hubs requires a different approach to liquidity analysis and tax planning than purchasing apartments.
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Office real estate boom and demand for Class A
The main driver of the commercial sector in 2026 remains the shortage of Class A offices. Large IT corporations and fintech companies relocating their headquarters to Cyprus have stringent requirements for workspaces. They value not only open floor plans and high-speed internet, but also compliance with ESG environmental standards, modern ventilation systems, and sufficient parking. In Limassol, which has cemented its status as a business hub, rental rates for such properties continue to rise, outpacing the residential sector. Investments in office real estate during the construction phase allow for yields of 7-9% per annum, significantly higher than the European average.
Street retail and retail space in new residential clusters
Retail real estate is also undergoing changes. Instead of traditional large shopping malls, investors are increasingly turning to street retail on the ground floors of luxury residential complexes. In 2026, space for private clinics, specialized organic food stores, cozy coffee shops, and premium fitness studios will be in demand. The key factors for success here are the population density in a given neighborhood and the purchasing power of local residents. Larnaca, thanks to the large-scale renovation of its waterfront, is becoming a promising new destination for retail, offering investors a lower entry barrier compared to Limassol while offering high capitalization potential.
Logistics hubs and warehouse properties
The growth of e-commerce and Cyprus’s emergence as a regional trade hub between Europe, Asia, and Africa have fueled interest in warehouse real estate. As of 2026, there is a shortage of modern temperature-controlled logistics centers with automated inventory systems. Warehouse space near Larnaca Airport and Limassol Port is in steady demand among logistics operators and distribution companies. This segment is considered the most conservative and reliable, as it offers long-term leases of 5–10 years, providing investors with predictable cash flow and minimal tenant turnover.
Tax features of the commercial sector
Commercial property taxation in Cyprus has several important differences. When purchasing a new commercial property, VAT is always payable at a rate of 19%. However, unlike residential property, VAT on commercial premises can often be refunded or credited if the buyer is a VAT-registered taxpayer and uses the property for taxable activities. Furthermore, owners of commercial buildings can take advantage of capital allowances. This allows a certain percentage of the building’s value to be written off annually as an expense, significantly reducing the taxable base for income tax or corporate tax purposes. In 2026, depreciation allowances for office buildings are typically 3% per year, and for industrial equipment within them, up to 10%.
Flexible spaces and coworking as a new trend
Changing work cultures have led to the growing popularity of flexible office spaces and coworking spaces. In 2026, many investors are choosing to invest in the creation of ready-made infrastructure for small and medium-sized businesses rather than simply renting out bare walls. The coworking management model allows for risk diversification through a large number of small tenants and higher revenue per square meter. This format is particularly relevant for Paphos and Nicosia, where a large number of digital nomads and startups are concentrated, seeking high-quality workspace without the commitment of long-term leases for an entire floor.
Management and maintenance of commercial properties
Owning commercial real estate requires more professional management than the residential sector. In 2026, management companies in Cyprus offer comprehensive solutions, including technical audits of utility systems, cleaning and security management, and tenant management. The cost of professional management is typically higher, but this is fully offset by the building’s longevity and its continued appeal to top companies. When selecting a property, it is crucial for investors to evaluate not only the current rental rate but also the building’s technical potential for future modernization, as office requirements continue to evolve in line with technological advancements. A thorough audit of contracts and utility systems at the acquisition stage is key to the successful implementation of a commercial strategy on the island.
