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Special Insert: Investments & Real Estate in Greece

Athens Real Estate is Booming – But Are There Enough Construction Companies Out There?

March 25, 2022
By Leonidas Mitsoskouras

It is no secret any more that real estate in Athens is booming – but this didn’t happen overnight. And the road that led to the real estate market rebound was a really tough one.

It all started with the IMF bailout and austerity measures. The 2010-2018 period was a time of deep reforming of the structure of the Greek economy. During this reforming the ‘real market’ was greatly affected – and, of course, the real estate market was no exception: property prices during this period decreased by 40-45%

With the implementation of significant economic reforms, the Greek economy started showing signs of growth in 2018 and investors and CEOs of  financial institutions around the globe showed their trust and willingness to invest in the Greek Economy.

Consequently, 2018 was the year that the Real Estate Market started warming up and 2019 was the year that the market started developing at a really rapid pace.

THE STATUS TODAY: 2022

Prices have risen by an average of 20%  since 2018, but they are still 25% lower than their historical highs. And, as financial studies indicate, they will continue rising until 2027 (at least 5-7% annually). So, that is good news for the Real Estate Market.
Actually, very good news.

Nonetheless, as expected, demand for properties has come with an increasing demand for competent technicians, engineers, and construction companies.
Can local construction companies support the quantity and quality of services required by this booming (international) market?

In order to answer this question we need to go back a few years. It is vital to understand the circumstances of the market and how the crisis affected Greek construction companies that were involved in residential projects.

CONSTRUCTION IN GREECE DURING THE CRISIS

By 2015, construction companies in the residential sector had already suffered a huge hit from the financial crisis in Greece (five years up to that year of very harsh financial conditions). Many companies had closed down and many of the remaining planned to do so. Nevertheless, there were a number of construction companies that displayed remarkable resilience.

In this tough business environment, some construction companies managed to adapt to these ‘arctic’ conditions and were determined not to give up. They hoped to hand on until the coming of the ‘business spring’.

A considerable number of small/medium construction companies had already started reforming their business models to make it through this ’business winter’:

  • Engineering groups teamed up to offer a turn-key solution for end clients

Until then business units/engineers/companies were isolated. As a consequence, property owners had to turn to a number of engineers and/or technicians in order to cover the needs of a construction project. I.e. one had to find an architect for the architectural study and issuing of the permit, and to mechanical and civil engineers to supervise the project.
Additionally, they had to hire independent technicians, to find independent suppliers, etc.

Obviously, this can be really frustrating for an owner, as this model often leads to coordination issues, poor quality and/or lack of budget control, but this was seen as a business opportunity by engineers/business entities.

Many of them decided to team up or create companies with a wider portfolio of services, offering ‘one stop shopping’ for the client.

In other words, the model for a turn-key project became the EPCM model: Engineering, Procurement, Construction, Management.

This model provided benefits for the client, in terms of quality, peace of mind, and a well-defined budget. Likewise, there were benefits for the companies/professionals, creating an increase of turnover, adding up to a competitive advantage against old-fashioned companies and their business models. This business model became dominant during the ‘crisis’ period.

  • Procedural Implementation/Quality Management Systems

Through the EPCM model and the teaming up of engineers, there was an expansion of company portfolios and more complex processes were introduced.

Despite the considerable commercial advantages this new model brought, it required a high level of coordination and quality control.

Technical companies invested in upgrading their Quality Management Systems and incorporated ‘procedural’ thinking and implementation, so that reengineering their processes to ensure that higher complexity did not affect quality.

  • E-commerce, digital marketing

Under those suffocating financial conditions, businesses had to expand their ‘audience’ in order to approach new clients, to expose themselves to a higher number of  projects.

Digital Marketing became the Oasis in the Crisis Desert. Businesses that wanted to survive had to expose themselves to Digital Marketing, creating a Digital Identity so as not merely count on word-of-mouth marketing.

Eventually this led to a higher level of transparency i.e. through Google reviews, Facebook reviews, etc. Construction companies had to shift to ‘customer-focused’ policies and enhance customer experience. This developed an obligation to guarantee that their digital reputation matched up with the brutal Internet competition, thus succeeding in bringing in the extra clients they needed.

  • Electronic Platforms-Business automation

The ‘less-for-more’ environment left no room for mistakes in the implementation of projects. Communicate-Communicate-Communicate principles had to be applied. There has to be effective communication, both internally within business structures and externally with the client.

Some of the top construction companies moved a step further. Through the use of off-th-shelf software or custom software, they digitized their processes. The  digitization of communication made it faster and more reliable. Business automation ensured that processes ran smoothly and that both inbound and outbound communication are effective.

All the above may sound like fundamental principles for a modern company,  nevertheless, it is a worldwide fact that small to medium residential construction companies are usually technologically ignorant or tend to repel more enhanced business principles. It is easier for them to work with simpler business models.

However, the extremely difficult conditions in Greece led to an evolution of the local construction market that otherwise could have ‘taken a century’ to take place. Principles that are certainly considered a novelty, for a relatively small market like the one in Greece, became an integral part of everyday business operation.

So are there enough technical resources to sustain the property boom? Yes and…No. The good news following the crisis is that the ‘Survival of the Fittest’ situation we described led to the rise of Quality in the residential construction sector.

Companies unleashed their creative thinking and rationalized their models.

Today the companies that survived are ‘monetizing’ the skills they developed.
Moreover, projects all over Athens and the Greek islands are proof that there are very competent companies out there. They can now meet international demands for high quality, high-end design, low energy-environmentally friendly projects that are implemented efficiently, smoothly.

The bad news: The crisis killed a lot of companies. So today’s demand is higher than the supply of services. However, Greece always had a construction sector that  contributed significantly to the country’s GDP. There are a lot of companies and engineers out there that are preparing themselves to ‘catch the train’ and meet the increasing demand.

So the answer to the question ‘are there enough technical resources’ is ‘Yes’ for Quality, ‘Trying to’ for Quantity.

But investors seem untroubled by this question. They are eager to get their own ‘piece’ of investment in this great country. A country with advantages that few other countries in the world can brag about. It seems as though summer 2022 will be a really ‘hot’ one for the real estate and construction market.

Leonidas Mitsoskouras is the Commercial Manager of ReaktoR Group, construction company based in Glyfada, Athens, Greece. His areas of specialization is Business Development and Building/Renewable Energy Technologies applied in residential buildings.

 

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