(Bloomberg) -- When the first phase of construction is completed in 2026, the site of the former Athens Airport will be unrecognizable.

While the Eero Saarinen-designed East Terminal will remain in place, abandoned hangars and runways will be replaced by a multiuse development — billed as a smart city — twice the size of New York’s Central Park.

Within three years, the 650-acre site along the southeast coast of Athens will feature around 10,000 upmarket beachfront homes and apartments, a Mandarin Oriental hotel, one of Southern Europe’s largest malls, a marina for mega-yachts, a Hard Rock-branded casino, a state-of-the-art sports complex, a private school, cultural and entertainment centers, a sprawling beach and a two-million-square-meter green space slated to be the biggest coastal park in Europe, all overlooking the azure waters of the Saronic Gulf.

This privately-funded project, called the Ellinikon, will, in short, transform the Greek capital.

At the inaugural event last October, Prime Minister Kyriakos Mitsotakis described the Ellinikon as “the prologue to a new era for the coast,” noting that it is expected to generate over €14 billion ($15.2 billion) in tax revenue during its 25-year development lifecycle. With the country still getting back on its feet after a decade-long debt crisis, the Ellinikon is being stood up as a symbol of Athens’ revival.

While big construction projects are being pared back in many parts of the world due to rising construction costs, interest rate hikes and labor shortages, Greece is in an unusually strong economic situation. It is benefiting from a rebound in tourism, strong residential and commercial sales and investor optimism about the return to power of business-friendly Mitsotakis, who was just reelected in a general election.

This has overlapped with a boom in infrastructure and cultural projects, including the 2017 opening of the Stavros Niarchos Foundation Cultural Center, an education, arts, and recreation complex now home to the National Library of Greece and the Greek National Opera, and the 2020 debut of the National Museum of Modern Art in a former beer factory. Plans are afoot to significantly renovate the 150-year-old National Archeology Museum, and the city has also broken ground on a fourth metro line, with the first section scheduled to open in 2029, that will connect densely-populated neighborhoods such as Kipseli and Galatsi to the center.

This energy is felt on the streets. Athens cafes and tavernas buzz every night of the week, and tourists mill around squares where rioters once clashed with police. It has also brought a new level of affluence: the city gained nine new 5-star hotels between 2019 and 2022 — bringing the current number up to 30 — and the Conrad and Waldorf Astoria are currently working on a luxury complex that will combine hospitality services with upmarket apartments

That market is one the Ellinikon is trying to tap. To generate early momentum, the developer, Lamda began selling residential properties in the 200-meter Riviera Tower – soon to be the country’s tallest building — with an average price of €14,000 a square meter. That’s significantly more expensive than the first-quarter average of around €1,809 a meter in the center of Athens and €3,368 in the Ellinikon’s neighboring southern suburbs, based on data from Greek property website Spitogratos, but it’s also a relative bargain compared to high-end real estate prices elsewhere in Europe.

So far, all 170 units in the tower have been sold, with the vast majority going to Greek residents and members of the Greek diaspora. Sales for leases and properties at the Ellinikon have so far reached €1.2 billion, and prices for residential real estate in neighboring suburbs have also begun climbing. Lamda will begin marketing outside of Greece starting next year.

Rising property prices have been a sensitive political issue in Athens, as residents compete against wealthy foreigners, Airbnb landlords and investors for limited housing, and unpredictable rent increases have raised the fear of evictions. To get a handle on the situation, the government introduced a program earlier this year to grant low or interest-free loans to people younger than 39 seeking to acquire their first property. From July 1, rules will also go into effect that will increase the minimum property investment needed to obtain a golden visa from €250,000 to €500,000 in several parts of the country, including sections of Athens.

While the Greek capital has only recently become a destination for weekend holidaymakers, Constantinos Zouzoulas, Managing Director of Axia Ventures Group Ltd, the investment banking group that focuses on Cyprus, Greece and Italy, expects that the Ellinikon will turbocharge that trend, and could even extend the tourism season to the entire year.

“Our conservative estimates are that the Ellinikon will add 2.5% to Greek GDP through completion and attract 1.5 million tourists” a year, Lamda CEO Odisseas Athanasiou said in an interview.

The Ellinikon is a “landmark project that will be a game changer for Athens, its greater Attica region and Greece as a whole,” said Zouzoulas, adding that this city-within-a-city will also attract new residents to the area.

As the coastal development is within the urban grid of Athens, just 11 kilometers (6.8 miles) from the center, the new landscape will also change the feel of the capital and its adjoining municipalities. The park, in particular, “is a much-needed proposition in a city that lacks green space,” Zouzoulas said.

Athens now faces the challenge of integrating the Ellinikon and connecting the city’s existing services to the area, as well as building out new roads and metro lines. This “will require significant infrastructure spending,” Zouzoulas said. But while the costs will be high, in terms of both finances and time, he was positive about the ultimate outcome.

As it gradually becomes part of the daily flow of Athens, he said, the Ellinikon “will further improve the urban landscape and the lifestyle of citizens.”

--With assistance from Sotiris Nikas.

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Author: Paul Tugwell