Innovation hubs: what they are and why it is profitable to invest in them

Innovation hubs have appeared in Europe relatively recently, but they are already attracting tech companies that need not just a place to work, but a space where the employees can realize their creative potential, communicate, create collaborations with other teams and of course have a rest.
In Cyprus, innovative hubs are beneficial for both tenant companies (income tax from 2.5%) and investors in hubs (expected annual ROI is from 5 to 11%).

Innovation hubs — our new reality

An ordinary office is already not enough for modern employees — it doesn't inspire them. Working from home is not suitable for everyone and does not allow you to concentrate. To create a decent workspace, business is forced to either transform ordinary offices to fit new conditions, or look for offices and coworking spaces of a new type - innovative hubs based on the concept of sharing economy. In such hubs, a company rents an office and benefits from advantages of a common creative space.

Hub vs office: What's the Difference?

In short, these are two completely different things. Innovation hubs are not just an office building or coworking space, they are a whole ecosystem for work, communication and cooperation of various businesses.

Hubs:
  • a common space that was originally designed for the creative work of tech companies;
  • offices, meeting rooms, sleeping pods, play and training areas, food court, lounges;
  • a community of like-minded people that brings together modern businesses in one space.

Benefits for companies

  • A well thought-out functionality of the hub is aimed at the best service for all tenants.
  • Renting an office in the innovation hub is way cheaper and more profitable than renting a standard office, equipping and adapting it to all modern workspace requirements.
Special Cyprus benefits
The innovation hub in Cyprus is a real heaven with low taxes and a super preferential IP Box tax regime.
José M. Alarcón Unsplash
The standard income tax rate in Cyprus is one of the lowest in Europe — 12.5%.
The IP Box regime can reduce income tax - up to 2.5%. To calculate the tax rate under IP Box regime, you take company profit from intellectual property, software, and inventions. 80% of it is not taxed; the remaining 20% are taxed at a rate of 12.5%. Read more about IP Box regime and how to pay 2.5% income tax here

Benefits for investors

Creative space brings more money — this is today’s reality. No one needs only office walls; they have to express philosophy and meaning, to give people additional value.

In innovation hubs:
  • expected annual ROI is from 5 to 11%;
  • an investor buys shares in a company that owns a hub, not just square meters;
  • there are only a few investors per object, which allows the investor to really influence the company decisions;
  • entry threshold - from € 1,000,000.
Supporting factors:
  • 31% growth of the IT industry on the island in 2019, the forecast for 2021 — 38%;
  • Cyprus resident companies are required to have an office on the island;
  • IT companies need class A office space;
  • a lack of office spaces in Cyprus;
  • the office real estate market in Cyprus in 2020-2025 will grow at the rate of 30%.
Omar Flores Unsplash

Cyprus innovation hubs

SPM.ESTATE has announced the construction of innovative hubs in four cities in Cyprus — Limassol, Paphos, Larnaca and Nicosia.

Construction has already started in Paphos and Limassol. The estimated product launch date is December 2022. Both spaces will be united by one ecosystem and in the future they will be linked to European hubs.

RIO hub in Paphos

It is the first innovation hub in Cyprus for stimulating creative thinking and teamwork, following the Stanford University approach.
  • offices of technology companies;
  • service offices for start-up teams;
  • sleeping pods;
  • game room;
  • gym;
  • meditation and yoga area;
  • YouTube studio;
  • food court;
  • space for pitches and presentations;
  • multifunctional coworking space.
RIO spaces follow the main trends: create communities, expand social contacts and inspire residents to create products that are going to make our world better.

The expected ROI for investors is 11.78%.

The Wall Street Hub in Limassol

An innovative hub is being built in the island's business center, Limassol, on one of the city's best business streets.

Wall Street is:
  • 2,000 m² for startups and mid-sized teams;
  • 2 floors for corporations;
  • A co-working space for 150 people;
  • Conference amphitheater with 250 seats;
  • Creative buffet for residents and guests of the hub;
  • YouTube studio;
  • D-Room for design thinking;
  • Sleep pods;
  • Yoga and meditation area;
  • Game room;
  • Rooftop bar.
The total area of the project is 12,250 m². Starting from the second floor there is a view of the sea.

Rental price — 75 €/m².

Expected ROI for investors — 7,36%

A short checklist for innovation hubs

SPM.ESTATE will build 4 innovative hubs in Cyprus, 2 of them are already under construction. The delivery date is December 2022.

Renting an office in a Cyprus innovation hub, the company gets:
  • an office, services and all necessary facilities of a modern workspace;
  • a community of like-minded people from modern businesses for communication, interaction and collaboration;
  • a low tax rate at 12.5%;
  • a chance to reduce income tax to 2.5%.
An innovation hub business model is more beneficial than of a usual office:
  • expected annual ROI is from 5 to 11%;
  • an investor buys shares in a company that owns a hub, not just square meters;
  • there are only a few investors per object, the investor really influences the company decisions;
  • entry threshold - from € 1,000,000.
In the past few years, due to the preferential tax regime, companies from all over the world have moved to Cyprus. In 2019, the IT industry on the island grew by 31%, the forecast for 2021 is 38%. IT companies need class A office spaces, which are lacking in Cyprus, so office real estate growth is projected at 30% in 2020-2025.
An innovation hub is beneficial to everyone:
  • tenant companies develop in the perfect environment that is fully adapted for creating new unicorns; 
  • venture investors can easier find new future unicorns;
  • investors in hubs get high ROI;
  • Cyprus economy is growing, the island and residents’ life is improving.

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