The property market in Portugal is recovering the growth trajectory it was on before the Covid-19 pandemic, a strengthening driven in a large part by the recovery of investor confidence. This is one of Savills' conclusions to the Portuguese real estate environment, which predicts that the sector's growth will continue into 2022.
According to the consultancy firm, from January to the fourth quarter of the year, 1.1 billion euros have been invested in commercial real estate in Portugal, and in the third quarter the volume of investment was 534 million euros. Savills estimates that the 2 billion mark may be reached by the end of the year.
"Since the beginning of the year, the office segment has (...) led growth in the property market, with a 36% share, closely followed by the hospitality sector, with a 20% market share. On the other hand, the retail sector is the one that has suffered most from the effects of the pandemic, representing only an 8% share of the Portuguese real estate market in a YTD (year-to-date) analysis," the consulting firm said in a statement.
They also highlight the fact that foreign investment represents more than 80% of total transactions closed until September, registering a strong presence of French, British and Spanish investors. "However, domestic investment has been increasing, driven by investment management funds and private investors interested in acquiring products in the office and retail segments, with special interest in high foot traffic areas," the statement said.
A more buoyant office segment in Lisbon and Porto
As for the office segment, in September it registered higher take-up levels in Lisbon and Porto than those registered in the same period of the previous year, with take-up volumes of 6,341 square metres (m2) in Lisbon (4,642 m2 in 2020) and 8,071 m2 in Porto (7,515 m2 in 2020). A recovery trend that should continue until December, according to the company.
In Lisbon, since the beginning of the year, the office segment has already taken up more than 80,000 sqm, 21% less than in the same period last year. In Porto, between the first and third quarters, the volume of office take-up has already exceeded the values observed in the same period of 2019, but still remains below those registered in 2020.
Homes better prepared for teleworking
Savills also considers that the residential sector should continue to see the reconfiguration of homes, "to better adapt to the needs of the occupants and the new reality of remote working".
"Additionally, demand for housing in large urban centres is also expected to be observed in the peripheral regions, which offer larger areas at lower prices. Renting is expected to gain more ground, consolidating as a trend and as a necessity, especially for younger people. (...) However, the growing demand for the rental market is not yet accompanied by the available supply", says the consulting firm.
"Times of great dynamism" in commercial real estate
For Alexandra Gomes, Head of Research at Savills Portugal, the commercial real estate market in Portugal is experiencing, in the final stretch of 2021, "times of great dynamism and a strong appetite on the part of players, across all real estate segments, helping to forecast a robust start for the beginning of 2022".
"The market fundamentals that underpin the attractiveness of real estate investment in our country were fortified after the pandemic period. We continue to see interest in implementation and expansion by international occupiers, investors from all corners of the world now wishing to diversify their investment portfolios and looking to Portugal as an attractive and safe destination, and the market following the new trends in terms of the development of alternative segments," he concludes.
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