Filenews 17 February 2021 - by Theano Thiopoulou
They started to get tough for homeowners who have to deal with the pressures of lower rents with what they were used to in the pre-pandemic years. Going through the third phase of the restrictions imposed by the Republic of Cyprus, a barometer for the formation of rents in stores as a result of the impact and the progress of COVID-19, is expected to be the next quarter. From March and April if the epidemiological picture improves it will clear up how many shops or offices can withstand reopening under peculiar conditions.
According to information from "F" it has already been observed that several tenants are asking for reductions from the owners, because they have been under-functioning for a long time. Catalysts for the decisions that the owners of the properties will make, whether or not to reduce prices and at what height, are the position and situation in which their property is located, the demand that may be recorded, but also how much they are financially pressured themselves.
In any case, consultation between tenants and landlords will play a decisive role, in order to maintain their rental relationship and to normalise the market situation as quickly as possible. However, as mentioned in "F", some owners are in negotiations regarding the revision of the rents or terms of the contracts signed in the period before the pandemic.
Even more difficult is the situation in the smaller shops, which are generally owned by micro-owners. On the one hand the landlords want to maintain the income and on the other the tenants who do not see cash in their fund because of restrictions on their operation.
According to research and estimates by Dane and Associates, it is the professional housing, especially retail and catering outlets, that continues to accept the effects of COVID-19. The reduction in store rents, even in the new contracts after the normalization of the situation, is estimated to reach about 15%, while on roads that are not "first view" the fall is expected to reach up to 20%. Also, little or no drop in rents is estimated to note the properties, which among other things will have relatively small sales showrooms and larger storage spaces in uniform functionality.
A similar climate of reductions is expected to prevail in professional office spaces. The pandemic crisis is expected to cause both job losses and changes in the way we work, with distance work gaining more ground. Of course, it is thought that it will be enough time to determine who and how many employees, but also in what form of employment relationship will continue to work. The biggest drop in rental yields, according to the office Dane and Associates is estimated to have famagusta province falling between 4.5% and 6% when last year it was 5% to 6%. In the other provinces there are no differences in yields compared to 2020 and they range from 5% to 6%. Rental yields in shops are forecast between 6% and 6.5% in Nicosia, 5% to 5.5% in Limassol and Larnaca, from 5.5% to 6.5% in Paphos and from 5% to 6% in Famagusta province.
It is worth noting that the executive has tabled two bills extending tax incentives to landlords that will voluntarily reduce rental costs for their tenants in the period January – March 2021.
