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Portugal's Real Estate Investment Trends 2022-2023

Portugal's Real Estate Investment Trends 2022-2023 -
Portugal's Real Estate Investment Trends 2022-2023 - Portugal Business News

Real Estate investment in Portugal in 2022 registered an annual cumulative turnover that is 43% above the figures for 2021, showing an uptrend and a positive outlook for 2023.

Real Estate investment in Portugal during the 3rd quarter of 2022 reached over € 1.100 million, which is double the sector’s cumulative turnover between January and September to reach € 1.920 million according to a study by Fortune 500 company JLL.

The performance of Portugal’s real-estate sector is increasing the mismatch between supply and demand, leading to rising prices. Demand is driven by both domestic and foreign investors and is quickly absorbing supply as units are sold as soon as projects are launched.

The office-space market segment was comprised of over 293.000 sq. m for the first nine months of 2022 in the Lisbon and Porto regions. The Lisbon region registered growth that is higher than the 2008 historical record, thus confirming unprecedented growth in 2022.

The office-space as well as the industrial and logistics market segments were the most dynamic asset-classes, receiving 39% and 27% of capital allocations in the real-estate sector.

There is a strong demand for large areas that are above 1.000 sq. m and a number of companies are choosing to rent office-space in advance, while projects are still under construction in order to ensure compliance to criteria such as sustainability. The Financial Services sector is driving demand and the Parque das Nações area received the largest market share. Prices for prime office-space are stable at € 26/sq. m monthly in the CBD. With the inauguration of the new World Trade Center, office-space supply increased by 25.000 sq. m and it is to be noted that new projects are obtaining sustainability certifications.

Retail trade is boosted by tourism figures and brands are moving forward with expansion plans, in line with market growth. There is a mismatch between demand by the retail trade sector and the limited available supply. Despite rising consumer prices, the outlook for the retail sector is promising, mainly for brands located in shopping malls and retail-parks.

In the industrial and logistics market segment, there is a shortage of new projects which is curbing industrial growth. Despite the lack of supply, there is a total supply of 323.000 sq. m. The third quarter was especially dynamic with 50% of annual figures for occupied space amounting to 163.000 sq. m. In this market segment, there is rising demand despite an increasing number of new projects. In addition to supply constraints, new projects are affected by rising costs and are taking longer to complete.

According to Pedro Lancastre, CEO of JLL Portugal, Portugal’s real estate market is promising and is an asset class that is favored by investors. He added that, without any doubt, 2022 is one of the best years in Portugal’s history for the real-estate sector. Despite rising inflation and interest rates, the unemployment rate is at a record low and savings levels are high. All these factors show that supply levels are clearly suboptimal in all real-estate segments despite adverse macroeconomic conditions.

Real-estate investments are driving competition between investors and are leading to investment projects that are above €100 million. This was the case for Atrium Saldanha by Sonae Sierra and Bankinter and for a co-living portfolio that is a joint venture between Round Hill and CPPIB. Both projects amounted to €200 million. There was also an industrial and logistics portfolio amounting to €125 million and an office-space portfolio comprising three buildings that amount to €120 million. Another investment included the purchase of the Novo Banco headquarters by Merlin Properties for €112.2 million.

It is to be noted that foreign capital accounts for the largest share of investments, with 77% of cumulative investments. However, there are joint ventures between domestic and foreign market-players that led to major investments in 2022.

Portugal’s real-estate sector is also obtaining higher yields with up to 25 basis points for a number of market segments, especially for office-space (4,25%), prime shopping malls (5,35%), food retail (5,00%) and care homes (5,25%). The other market segments are stable, with logistics at 4,75%, while hotels and student housing are at 5,0% and retail parks are at 6,25%.

Figures for tourism for the third quarter of 2022 also registered an accelerated recovery with performance indicators that show not only much higher levels of activity compared to the two previous years but have reached thresholds that are similar to those of 2019, a year when the tourism sector reached record highs.

The hotels market segment performed well during the period between January and August 2022, with 47.13 million overnight stays. These indicators are only 3% below 2019 levels and amounts spent were higher compared to 2019.

Lisbon’s residential market is performing well during the 3rd quarter of 2022 with a number of new projects and an average price of € 4.270/sq. m, that is an 8% increase compared to the same period in 2021. In the luxury segment, the average price is stable at € 7.210/sq. m. In the rental segment for residential properties, there is higher demand despite limited supply, driving prices higher.

Portugal’s real estate sector has shown both resilience and high growth despite macroeconomic challenges, thus supporting a positive outlook for 2023.


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