Office rents and prices under pressure: Different trends in the course of an adverse macroeconomic environment- The Greek case

Greek property market remaining under pressure after eight consecutive years strives for a recovery, in an economic environment characterized by financing shortage, capital controls and persisting uncertainty. Under these non-typical circumstances commercial property in general and prime office market in particular behave non-conventionally until eventual stabilization. Although commercial property price research mainly focuses on rentals rather than values, primarily due to lack of accessible transaction or valuation data, the present paper attempts to identify the differing trends in both value and rentals evolution along with the determinants behind this differentiation, beyond property yields. Using the Bank of Greece office dataset, compiled from the Greek REICs portfolios, a number of hedonic models are developed for different time periods in order to capture subtle or major changes in the determinants of rent and value levels. Furthermore, the current study attempts to construct a proxy variable for vacancy rates examining its potential independent effect on office rents.