Retail Property Market

Until recently the retail property market in Greece has been focused on 'high street' locations within the main cities and more affluent suburbs. Shopping centre development had been limited to small-scale arcades, which lacked the critical mass to ever compete effectively with 'high streets'. The opening of the Mall in Athens and Mediterranean Cosmos in Thessaloniki in 2005 has provided Greece with its first super-regional shopping centres.

Within Athens the central retail areas of Ermou Street, Kolonaki and Omonia plus the suburban retail areas of Kifissia, Glyfada, and Piraeus have attracted a range of top international and national retailers. There is intense competition for prime locations and the lack of shopping centre supply has placed pressure on rents and key money (premiums paid on the agreements of new leases), which have more than doubled in the last ten years. Ermou Street is listed within the top 10 Commercial Streets in Europe.

A number of international retail groups (e.g. Inditex, H&M, El Cortes) are expanding into the Greek market and are competing strongly for larger units (over 150m² ground floor sales) in prime locations. Despite new competition from the new shopping centres the main 'high street' locations continue to attract consumers and retailers. The impact of the shopping centres is likely to be felt more in smaller secondary local retail markets. Athens is the third most expensive retail location in Europe.

Due to the reluctance of owners to sell, few prime retail investments come onto the market. However, Lambert Smith Hampton acted on the sale of a building within the main shopping area of Kolonaki this year, which achieved a gross yield of 5.8%. The building was not in a 'grade A' location, so we consider that prime retail properties in the best locations of Athens would achieve gross yields of sub 5.5%.

With such high rents and low yields there are many development opportunities in the retail sector. They key problem is the lack of suitable development sites in Central areas. For developers with an understanding of retail markets there are opportunities for redevelopment of older buildings to utilize upper floors and improve sales areas and therefore add significant value to retail property.

Source: Lambert Smith Hampton