High demand for modern and "green" offices reflected in rent prices

Demand for office buildings – particularly in the capital of Nicosia – is so high that an additional 84,000m2 of new space is expected to be built by 2024-2025.

According to the Danos Cyprus Real Estate Market Report for the 2nd Semester of 2022, strong demand driven in part by businesses looking to bring staff back to the office after the pandemic, has led to some significant investments in the specific market, with 70,000m2 currently under construction or vacant in Nicosia alone. An additional 14,000m2 are in the planning stage. “A total of 84,000m2 is expected to be built in new offices by 2024 – 2025, as investors attempt to compensate for the deficit of new developments seen throughout the previous decade,” says the Danos report.

“Nevertheless, industry executives do not seem to be worried about the future prospects of the market, as the demand for modern, and mainly ‘green’, offices is very high. Already, during the last half of last year, the absorption of offices (new leases) is estimated to have reached the record level of 25,000m2. This development proves that – despite the mediation of the pandemic and the prevalence of teleworking – most businesses choose physical presence for most of their staff, at least for some days a week,” says Danos.

The high demand is also reflected in rent prices, says the report, which are now €12-€22/m2 a month in Nicosia, while in Limassol there are some cases where they are as high as €45/m2.

In terms of office sale prices, Limassol was the most expensive town per square metre in 2022 with €5000-€6,500/m2, followed by Nicosia with €3,000-€4,500/m2, Larnaca with €2,000-€2,500, Paphos with €1,500-€2,000 and Famagusta with €1,500-€1,500.

The problem is old office buildings and the uncertainty surrounding their future use

But it is not all good news for the sector, as there is a significant stock of older buildings on the market, which have been abandoned by businesses – local and multinational – in favour of new, more energy efficient and environmentally friendly structures. And there is a dark cloud hanging over how these buildings are going to be treated.

“These properties, having been built mainly in the period 1990 – 2010, will require significant capital to be energy-efficiently upgraded if their owners wish to continue attracting new tenants. Alternatively, it is possible for them to change their use, although again this is not a particularly simple matter,” according to the Danos report. “Therefore, how this real estate stock will be utilised in the coming years is a question that has yet to find a satisfactory answer.”