The crisis of the office market in Athens: an interpretative approach

Abstract

This paper attempts to explore the macroeconomic, microeconomic and institutional factors that played a role in the boom-and-bust in the Athens metropolitan area office market during the 1995-2005 period. Under the gradual deregulation of both the capital market and the financial system, interest rates were continuously decreasing. Due to fierce competition in the banking sector, the dysfunctions of the financial system were accentuated; this led to substantial loans being easily granted for the construction of new offices. Within a context of high fund liquidity, investor’s optimism about economy and real estate market, rental values were constantly increased. The inefficient property market and the existing taxation system, created opportunities for investing in offices, through which, the legalization of significant funds resulting from the underground economy activities was possible.