Reconstruction of buildings, the new international trend in real estate

Reconstruction of buildings, the new international trend in real estate

Investors prefer existing properties to new developments.

The “green” office building of Prodea in Syngrou Street is an example of the reconstruction of existing buildings in the center of Athens.

The real estate market of Attica gathers significant investment prospects for 2023, according to the forecasts of foreign and domestic institutional investors, who participated in the latest annual Emerging Trends in Real Estate survey carried out by PwC on behalf of the Urban Land Institute (ULI).

“Attica has significant prospects for a future increase in the values ​​of investment properties as well as rents”, although according to this year’s survey it remains in 23rd place in the pan-European ranking, among 30 cities, without changes from last year. Given that from last year the ranking is based on the size of each market, the position of Athens is considered satisfactory.

As one of the survey participants, a real estate investment fund manager, states, “there is still a lack of supply of modern building stock due to the prolonged recession. Over the past 10 years there has been some new development of office buildings and shopping centers, but investment opportunities still exist.”

ESG criteria make it necessary to upgrade existing buildings, especially in the Greek market, where there is a shortage of modern bioclimatic properties.

According to Mr. Tasos Kotzanastasi, executive member of ULI’s global management committee and CEO of international real estate investment management company 8G Group, “in the short term there is clearly a lot of pessimism about the prospects of the real estate market in 2023, especially at the pan-European level. Rising interest rates, declining investment property values ​​and lack of liquidity have worsened investor sentiment.”

However, in the medium term, clear trends have begun to take shape, both inside and outside Greece, with ESG criteria as the “driving force”. “In Greece, there are not many buildings that meet the ESG criteria, as a result of which they are headed for obsolescence if significant funds are not invested for their energy and functional upgrade in the coming years. “Investors prefer to buy existing properties and reconstruct them, rather than proceed with new building developments,” Mr. Kotzanastasis says to “K”. As he explains, reconstruction is clearly a more sustainable solution, as it limits the carbon footprint and the environmental burden in general. But even more important is the financial part, as many investors are now shying away from new developments due to high construction costs from material appreciation, which has now become a very important factor for such investments. In this context, according to the PwC survey, 62% of respondents indicated that the purchase and reconstruction of an existing building is the preferred option for acquiring new real estate.

Accordingly, the focus is now also on the change of use of the existing buildings. Based on the conclusions of the survey, 54% of the properties acquired in the last year by investment funds changed use. In offices, the most popular option with 64% is their conversion into residences, followed by their conversion into mixed-use buildings with 18%. Accordingly, in shopping centers or parks the most popular option with 33% is their conversion into mixed-use buildings, followed by residences with 26% and logistics with 18%.