• In 2018 a real estate investment volume of 3.2 billion euros was registered, 77% more than in 2017
• The first quarter of the year had a very reduced availability of office space (5.96%),
• Overall, the domestic residential market recorded 24.1 billion euros in transactions in 2018 (+ 24.4% compared to the same period of last year)
• In the first quarter of 2019, seven new hotel units and three inaugurations of target units for rebranding projects are already open.
• Student Housing is one of the segments that have gained relevance, strongly driven by the growing foreign population studying in Portugal.
Real estate consultant Savills Portugal recently organized a Break'FasTalk in Lisbon for the presentation of the Spring Market Study 2018 – Trend 2019. The event brought together clients and partners for the presentation of a study that analyzes the results of the various segments of the real estate market in Portugal in 2018, and also aims to present the main trends and perspectives for 2019, especially in the areas of office, retail, industry and logistics, investment, residential, development and tourism.
After 2018 confirmed the attractiveness of Portugal in the real estate investment market, in 2019, despite the fall in real estate investment due to the scarcity of prime product, the domestic market will continue to mark its position on the radar of international investors, with the city of Lisbon to be compared with cities like Madrid and Barcelona.
For this year the main challenges in the investment segment will be the current trade tensions between the US and China, Brexit, the German elections, the uniform monetary policy of the European Central Bank and the results of the European elections.
All of this after having established a new historical record for the second consecutive year, Portugal has affirmed itself as the chosen destination for the investment strategies of international players from various parts of the world, with high levels of liquidity, being mainly directed to prime assets. In 2018 a real estate investment volume of 3.2 billion euros was registered, representing a significant increase of 77% compared to the volume of investment registered in 2017. About 90% of the investment registered in 2018 is international, the Spanish and English nationalities.
In 2019, the supply in the office market will be scarce in the face of high demand that has not been felt. This year alone has 31,508 sq.m of available office space, a drop in availability compared to 34,488 sq.m in 2018. However, a reversal of this trend is expected at the beginning of the new decade, doubling the number of sq.m available.
The first quarter of the year had a very low availability rate (5.96%), with emphasis on zones 4 (Secondary Zone) and 6 (Western Corridor) as the ones with the lowest and highest availability rate, respectively.
The pipeline for this year is located at 31,500 sq.m, and there have been trends such as renegotiation processes. For major occupants, 2019 will be a year of strategic analysis and consideration for new projects that will enter the market and that will raise the bar of quality of available stock.
At the end of 2018, 206,428 sq.m of office space had been occupied, an increase of 24% compared to the previous year and a total recovery, compared with historical figures for 2007 and 2008.
In 2019 prime rent is expected to maintain its upward trend in the overcrowding in Lisbon’s downtown and Porto areas. The shopping center market did not see any new opening in 2018, nor in the first quarter of this year.
In this market Portugal has a total stock of 4.2M sq.m, of which 3.7M are dedicated to shopping centers. This segment was once again marked by the dynamism of street commerce, which has had a strong growth trend, attracting new retailers daily and promoting the opening of new concepts that have contributed in large part to the transformation of the main urban centers.
The first quarter of 2019 saw a sharp fall in absorption volumes, only 7,154 sq.m, compared to 55,783 m2 in the same period of the previous year, a decrease in a period of high demand but low availability of space with the desired technical area and requirements.
In 2018 the real estate market aimed at the industry and logistics segment maintained a level of activity with a reduced dynamic, with the promotion of new projects to be virtually nonexistent. The observed take-up reached a total of 165,000 sq.m.
In 2019 we have felt a greater stabilization and consolidation of prices, besides the promotion of projects directed to the prime segment, which will continue to rise. This year also saw the trend towards the introduction of new forms of housing regimes that reflect new lifestyles, beginning to bring to light models of housing based on shared economy and cohabitation. The leasing scheme will continue in 2019 to be one of the main options for a very significant percentage of the resident population in Portugal. In the future, it will be possible to see an appearance of about 520,000 sq.m for housing projects in the Lisbon region.
In 2018 the residential market in Portugal continued to post positive growth behavior. According to INE, 178,691 houses were sold last year, of which 85.2% were used dwellings. Compared to the same period, these results show an increase of 16.6%. Overall, the domestic residential market recorded 24.1 billion euros in transactions in 2018 (+ 24.4% compared to the same period last year), with the Metropolitan Lisbon Area and northern regions accounting for 64.6% of total transactions for the year.
This year, the tourism sector will emphasize the dynamization of areas considered as non-prime destinations, and Portugal will continue to establish itself as a destination of choice for specific niches. The international hotel brands continue to show interest in the national market, and the pipeline of new openings for the next years is located in 109 new hotel units.
In the first quarter of 2019, seven new hotel units and three inaugurations of target units for rebranding projects are already underway.
In 2018, the Metropolitan Lisbon Area received 6.3 million visitors and 14.5 million visitors, a slight increase of almost 2% and 1.1%, respectively, compared to 2017. In relation to Porto, the north of the country registered a total of 4.3 million visitors in 2018, 4.6% more than in 2017. Algarve has already registered 4.2 million visitors in 2018 - representing a continuous growth of 5% since 2016.
It should be noted that the great majority of tourists in Portugal are Brazilian, French and Spanish nationality, with the prevalence of British, Dutch and German nationalities in Algarve.
The conference also addressed several issues such as:
Lisbon, the “new” Business Hub
Factors such as talent, associated with the growing training of younger citizens and the ability to communicate in multiple languages; transport, taking into account new forms of mobility and reduced distances (compared to other European capitals); financial and social accessibility (factor linked to current market opportunities and city security); and, finally, real estate, which presents very competitive values and provides for a positive future pipeline, are attracting more and more multinational companies, promoting the creation of new business hubs.
The competitive prices of the Lisbon office market, together with the good economic results, security and mediaism that has been granted to Portugal in terms of tourism, have promoted the arrival of major international players such as Google, Uber, or BNP Paribas or to Teleperformance, which, together, have already occupied about 134,000 sq.m.
The growing emphasis on new, more people-centered organizational processes, coupled with the style of buildings and offices that these organizations seek (more complex and complete, giving more importance to issues such as air quality, comfort, lightness, and infrastructure and IT's) are the big trends for the future.
The new Investment Market’s Stars ("Alternative")
With the evolution of social macro trends, with the increasing relevance of connectivity, mobility, conscious consumption, minimalism or instant gratification, new companies are growing and becoming new players in the investment areas.
Organizations such as Uber, Glovo, Ebay or MBway seek to invest in alternative asset classes. These alternatives are associated with new trends such as Student Housing, Co-living, Co-working or Serviced Apartments, which are becoming the new stars of the investment market. New forms of work and new forms of interaction are giving power to these alternative segments, which are beginning to attract more and more investors. Student Housing and Co-living are among the segments that have gained relevance, with an increasing number of foreign students studying in Portugal, as well as the high number of students displaced in the country.
Trends such as Built-to-Rent, Senior Living, Co-working and hybrids - which tend to bring together many of the trends in a single space - are also gaining more and more supporters, posing challenges to real estate professionals to create a new offer that allows access to these alternative segments, still embryonic offer in the national real estate market, with most of the projects still under development.