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International money is reshaping the Portuguese Real Estate Market

Colliers International has portrayed Portugal’s office and investment market, taking a closer look at what lies ahead. January 2018, already with more than one billion euros in transactions, anticipates the near future can only be bright.

Late last year, Colliers had already highlighted how international residential demand was shifting the centre of Portugal main cities and we all see, daily, the on-going tourism appeal of the country.

It should not come as a surprise international companies discovering Lisbon and Porto, too. Just recently, news emerged that Amazon will be expanding to Porto, joining a vast number of international companies that have been propelling Porto’s office take-up to record levels, while exposing the lack of adequate office supply. Colliers International recent report highlights how international demand has shifted Porto’s office market. Vasco Carvalho, Colliers Office Team, says “as demand changes from small independent workers to major international companies, so does the size of deals from below 200 m² to above 1.000 m²”. Vasco expects the Natixis deal will not be an out-lier, as “we have monthly inquiries about international companies equating expansion to Porto, but local developers must identify the opportunity and address the lack of supply problem”.

This shift has been felt in Lisbon for longer, with the area occupied by companies joining the market rapidly expanding. Gustavo Castro, Colliers International Research, highlights that “office areas above 1.000 m² accounted for 62% of office take-up, while only 5% represented areas below 200 m². It is not unusual existing buildings being unable to match area requirements in one floor and, sometimes, occupiers will have to take office space in two or more non-adjacent floors”. With rents on the rise, vacancy dropping, take-up increasing, the only hiccup remaining is supply, which is not only driving companies to the periphery, but also hindering Lisbon’s international competitiveness.

Notwithstanding the supply issue, office investment has led Portugal’s investment activity, surpassing the retail sector – the usual leader. Although, some important office buildings and portfolios remain on the market, in 2018, retail will again lead property investment in Portugal, with several shopping centres already sold in the beginning of 2018, and some others in the transaction pipeline. In a market with growth potential, decreasing yields, well performing economy and some good investment opportunities, it is not difficult to find what international investors are spotting in Portugal and even easier to anticipate a record breaking 2018.