27.09.2022
The Cyprus real estate sector has proven remarkably resilient despite the effects of rising inflation as demand for housing and office space continues to rise.
The real estate market is supported by increased demand for residential projects, but stakeholders report that interest in high-end office space has also increased.
Lucas Georgiou, head of real estate research and valuation at BNP Paribas/Danos Real Estate, said there was strong demand in the office and commercial real estate market despite pressure from rising inflation.
“The war in Ukraine has driven up the cost of living and business operating costs; however, at the same time, it also contributes to an increase in interest in office and commercial premises, as many companies previously based in Ukraine are considering Cyprus as an alternative base,” Georgiou said.
Despite market pressure, demand for offices remains strong, keeping prices stable from 2020.
“A number of high-end office buildings will soon be commissioned, and work on other projects is at an advanced stage.”
Georgiou said that the bulk of office demand is still in Limassol, but the capital is gaining momentum as some high-tech companies have settled in Nicosia.
According to a Danos report published by Phileleftheros daily, office rental prices in Nicosia range from 12 to 23 euros per square meter, while in 2020 and 2021 they were between 12 and 20 euros.
Office rental prices in Larnaca range from 8 to 12 euros per square meter, compared to 6 and 10 euros in 2020.
In Limassol, office rental prices range from 20 to 45 euros per square meter; in Famagusta they range from 5 to 12 euros, and in Paphos they range from 7 to 10 euros.
Sales prices for offices in Nicosia range from €3,000 to €4,500 per sqm, while in 2020 and 2021 they ranged from €3,000 to €4,000.
In Larnaca, prices for office space in 2022 are between 2,000 and 3,000 euros, higher than in 2021 (between 1,500 and 2,000 euros).
The sale price of offices in Limassol ranges from 5,000 to 6,000 euros per sq.m.; in 2021 it was 4,500 euros from 6,000 euros.
Prices in Famagusta range from 1500 to 2000 euros, and in Paphos – from 1500 to 2500 euros.
Prices for commercial property in Nicosia range from 15 to 45 euros per square meter and have remained stable since 2020.
Rental prices in Larnaca range from 6 to 20 euros – at the level of 2020.
Rental prices for shops in Limassol range from 20 to 45 euros per sq. m and are also stable from 2020.
Shop rental prices in Famagusta are between 10 and 25 euros per square meter, while in 2020 and 2021 they were between 8 and 20 euros.
In Paphos, shop rental prices have remained stable since 2020 and range from 10 to 25 euros.
Sales prices for shops in Nicosia range from 4,000 to 5,000 euros per sqm, in Larnaca from 2,000 to 2,500 euros, in Limassol from 5,500 to 6,500 euros and in Famagusta from 2,000 to 2,500 euros.
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Promising returns are encouraging investors to add office and commercial real estate to their portfolios.
In Nicosia, the rental yield for shops ranges from 6% to 6.5%, and for offices – from 5% to 6%.
In Limassol, the yield for both offices and shops ranges from 5% to 5.50%.
In Larnaca, the rental rate for shops ranges from 5% to 5.50%, and for offices – from 5% to 6%.
In Paphos, the yield from renting shops and offices ranges from 5.50% to 6.50%, and in Famagusta – from 5% to 6%.
As noted in the Danos reports, how long the war in Ukraine will affect the domestic real estate market will depend on its duration.
The construction sector is also expected to suffer from the effects of the recession, mainly due to rising costs of building materials and transport.
“Insecurity leads to the freezing of large projects and the temporary postponement of foreign investment.
“Strong inflationary pressures are increasingly turning investors to real estate markets as insurance against a possible further surge in inflation,” the report says.
Some of the major development projects taking place in Nicosia and Limassol provide an additional layer of security and encourage real estate investors to protect their portfolios from high inflation.
