Vacancy rates remain at about 10% or lower across the three cities that we cover in depth – Athens, Thessaloniki and Piraeus – and across the three sub-sectors of office, retail and industrial space. Greeces macroeconomic difficulties remain the key obstacle to any sort of growth in the sector. Despite internal real estate dynamics that have meant supply and demand of commercial, the sector is still facing severe problems in the short term. More taxes and increasing unemployment weigh heavily on the industry.

Cushman & Wakefield reports there are no major new retail space projects planned for completion in the remaining months of 2011 and in 2012. Industry commentators believe all major developments that include office space are currently on hold.

There are some opportunities in the real estate market, however:

- The government has announced plans to create a single land registry for all state-owned real estate assets. It is preparing a sale of state assets and real estate that could raise as much as EUR50bn (US$70bn). The sale is expected to attract strong interest from international investors owing to Greeces status as a tourist destination and could lead to the expansion of resorts and complexes.

- Of all the sub-sectors, shopping malls and Grade A office space have proved the most resilient.

Some key risks to the real estate market are:

- The government must raise tax income and is intending to add more taxes to the existing 12 in the real estate sector, including a change to the way properties are valued. Authorities previously taxed properties based on values set by the state, rather than by their market values and this change could result in tax values rocketing. In H211 the Ministry of Finance announced a new property tax for the next two years – which is estimated to cost owners between EUR0.50 and EUR10 per sq m – that will not help to alleviate any of the pressure on the market.

- The Greek economy will remain mired in depression through 2012 as deep fiscal retrenchment and internal devaluation take a damaging toll.

- While the current economic outlook is certainly grim, we warn that the longer term picture is also bleak, particularly for the labour market. According to the latest data the jobless rate hit 16.0% in June 2011 with youth unemployment double the headline rate.