Cyprus Office Market Report 2017

06 Jun/17

Macroeconomic Overview


Cyprus’ GDP increased by 2.79% from 2015 to 2016 (from €15.36 bn to €15.79 bn). In the first quarter of 2017, it recorded growth of 3.4% compared to the corresponding quarter of the previous year (source: CyStat).

Based on IMF projections, positive real GDP growth will continue in 2017 compared with the previous year with an increase of 2.53% (from €15.79 bn to €16.19 bn). GDP will continue its upward path in 2018 as well, with an increase of 2.28% compared to 2017 (€16.19 bn to €16.56 bn).


Negative inflation rates persist since 2013. In 2016, deflation continued at -1.4% compared to 2015, mainly due to the impact of reduced oil prices and historically high unemployment. According to the EC, it is expected to inflation is expected to rise to 1.5% in 2017 (compared to 2016) and to 1.4% in 2018 (compared to 2017).


Unemployment is set to continue its decline, although tackling youth unemployment continues to be a significant challenge. The unemployment rate started to fall in the first half of 2015, averaging 14.9% in that year and declining further, to 13.3%, in 2016. The European Commission expects it to decline to 12% in 2017 and 11% in 2018.

Cyprus Commercial Real Estate Market

The Real Estate and Construction sector has been showing positive signs of growth in 2017, restoring optimism to industry professionals. Following a constant decline over the past six years, market prices are stabilising. In 2016, a significant amount of companies proceeded to downsizing or even went out of business, drastically effecting demand and rent prices in areas such as Nicosia and Limassol.

Following a reduction and stabilisation in capital values and rental prices, investment yields are stabilising at low levels, a strong indication of opportunities for re-pricing of capital values, mostly in secondary location properties.

Investment yields in the Cypriot commercial market for Q4 2016 in Nicosia were at 5.8% for retail properties and 5.3% for offices, while in Limassol they were 5.6%, and 4.6% respectively.

Office Market Overview

Despite the prolonged recession in the Cypriot economy, affecting the Real Estate Market’s performance, recently approved incentives have established stability and a favourable framework that have further improved Cyprus’ international competitiveness as an ideal location for doing business, among international corporations. Regardless of the islands’ small size, Cyprus’ market appears easily adaptable with a positive longer term outlook. Cyprus promotes itself as the business gateway in the EMEA region, encouraging a pro-business environment by a network of double tax treaties with 60 countries and a legal system based on English common law, having attracted a significant number of companies to set their investments into the island’s key markets.

The last years, overseas investors are increasingly interested in acquiring Grade A office buildings in key locations to be rented to AAA tenants. On the other hand, Cypriot investors traditionally prefer acquiring properties mainly for own use even if recently many of them had to deleverage and ‘sell’ their own assets to the Banks (deleveraging via D2A swaps).

Consequently, in recent years, construction companies focused strategically in the construction of office facilities intended to satisfy the needs of multinational corporations attracted to the island. The Cypriot office market is concentrated in two main locations with the prime office locations being the cities of Nicosia and Limassol, where business activity is picking up due to local institutional or overseas investments and the strong presence of Government services.


The city remains the financial and business heart of Cyprus. In recent days, there is an increasing demand for new Grade A office properties. Most of the available stock in Nicosia is Grade B or C (20+ year old buildings some of which have been renovated). However, there are few modern Grade A office buildings such as Jason, and Jean Nouvel tower, which are high-tech, energy efficient buildings including all modern conveniences, with VRV air conditioning, large lobbies, double glazed  windows, video phones, double lifts, basement parking provisions and attractive architecture. 

The city hosts, among others, the HQ of all Cypriot banks. The Central Bank of Cyprus is located in the Acropolis area. In 2014, Wargaming Pcl announced the conclusion of the agreement with Rotos Developers Ltd for the purchase of the ‘President’ office building, on Dim. Severi  Ave, near the Presidential Palace, where they moved the company’s head office. On the same Avenue, the multi-functional headquarters of PWC are located, serving as the main hub of the operations of the organisation, housing most of its Nicosia based employees. During 2015, EY officially inaugurated their brand new Nicosia premises, equipped with advanced technology and design of the highest standard. This year, on Spirou Kyprianou Avenue, Cyfield-Nemesis will build Eurobank’s new headquarters (in place of former Santaroza building which is now demolished).


There is an increased trend for relocation and acquisition of office spaces in prime locations, entangling both capital values and rental prices. The demand for office space in the city of Limassol is expected to reach 20.000 sqm in 2017.

Limassol’s commercial property market is mainly focused into urban areas such as 28th Okt Ave, Arc. Makariou III Ave and Gladstonos street, principally occupied by banks, shops, office buildings, restaurants, services.

The Limassol coastline is undergoing a multi-million-euro transformation, with the construction of luxury high-rise buildings, such as the Oval and the recently launched Lanitis Towers. The 75m high Oval, an innovative and high-end office complex with an iconic structure, is a venture with an estimated price of €30 mn. Nearly 93% of its offices has been sold already, a key indicator that confidence in the Cypriot economy is strong, mainly due to enticing incentives (tax treatment, naturalisation scheme etc).

Office Market Values

Ofifice Market Values were increased in almost all cities and asset classes in Q4 2016 compared with Q4 2015. Across Cyprus, offices market values increased by 4.7%. In Nicosia by 5.65%, in Limassol by 11.04%, in Pafos by 1.78% and in Famagusta by 2.58%. Larnaca was the only city were prices did not increase, but remained stable. 

Grade A seafront/ sea view office spaces for 2016, were sold for €9.000 per sqm, while same type offices in secondary locations were sold for €4.500 per sqm.

Real estate capital values are expected to increase by 5% in the year ahead in commercial plots, 10% and 5% for Grade A and B offices respectively, whilst shops will face a 10% increase in central locations, 5% increase in touristic locations with secondary locations remaining at the same level as the previous year.

Office Rental Values

Monthly rental rates in terms of euro per sqm for Q4 2016 for office properties in Cyprus have rised by 10.3%, and 4.1% for Nicosia and Limassol respectively, compared to the corresponding quarter of 2015.

In 2016, the average rental value for Grade A seafront/ sea view offices, was €30 per sqm, while the same class in secondary location was €20 per sqm, on a monthly basis.


Office Transactions

The real estate market is gradually becoming more active. From 2014 to 2016, an increase of 2.8% was noted in transactions. In Q3 2016, 5.4% of the total RE transactions involved consensual bank repossessions through D2A swaps.