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The Greece Real Estate report examines the commercial office, retail, industrial and construction
segments alongside the construction sector in the context of the country's continuing economic struggles.
With a focus on the principal cities of Athens, Piraeus and Thessaloniki, the report covers the rental
market performance in terms of rates and yields over the past 18 months and examines how best to
maximise returns in the commercial real estate market, while minimising investment risk and exploring
the impact of the government led austerity on a long-stagnant market. Key complementary industry areas
are also examined including the construction industry and business environment, key in analysing
While the Greek government has overcome a number of obstacles, and the pace of contraction continues
to ease in 2012, we stress that a return to sustainable growth is predicated not just on successful economic
reforms but also on targeting policies at future growth industries and restoring confidence. The short-term
outlook for the real estate sector is not likely to restore investor confidence any time soon: the pipeline is
glacial, demand-destruction is endemic and oversupply is rife. The risks for the real estate sector as a
whole are therefore firmly weighted to the downside, with a slight silver lining coming in the form of
high-end space, particularly in the retail and office segments. Greece's construction industry is expected
to remain in recession for the sixth consecutive year in 2012, and we do not expect a recovery until 2015.
The pace of economic contraction in Greece could finally start to ease, which would be
supportive of our view that the depression will moderate in 2013. That is not to say, however,
that the depression is coming to an end. We still see another down year in 2013 and expect
growth to remain very subdued over the foreseeable future. Moreover, while we still believe that
Greece leaving the eurozone is not a one way bet, we warn that should this scenario materialise,
the economy would be facing a double-digit contraction as the banking system collapses and
private sector wealth is destroyed.
Ongoing economic pressures, investors' caution and government austerity drive will act as the
main impediments for recovery in the Greek construction industry. Our core scenario envisages
a sixth consecutive year of contraction in the industry in 2012 and little prospects for a recovery
until 2015. However, there a handful of infrastructure projects - mainly coming from EU
funding - that could offer some upside risks to our outlook.
The privatisation of Greek energy and infrastructure assets is proceeding at full-speed, with the
government planning to re-launch the entire process over the coming weeks. This is the third
time in two years that the venture will have been launched, although this time the government
has thrown its weight behind the process, making another false start unlikely. We believe there
will be significant efficiency gains for the Greek energy and transport networks, following the
liberalisation of the sectors which will pay dividends for wider economic activity in the coming
years. Some existing privately run assets create a positive precedent (COSCO in Piraeus Port,
the Athens International Airport for instance); this, combined with increased investor interest in
assets, suggests that if the privatisations proceed as planned, momentum will be gained quickly.