The Portuguese commercial property investment market closed the first half of the year with a total investment volume of 765 million euros. This is an 8% drop compared to the same period in 2022, according to a report by Savills.
"The market fundamentals that governed the first 6 months of the year are likely to remain in place until the end of 2023, with the rising interest rate framework continuing to exert greater pressure on investors' return expectations, generating greater delay in decision-making processes. Nevertheless, the market continues to see high liquidity for investing in the property sector," explains Paulo Silva, Head of Country at Savills Portugal.
According to the official, "office, industrial and logistics assets remain classes of interest for investors, however, the lack of core product and sellers' expectations limit the closing of transactions in these markets". On the other hand, he says, "value-add and development assets - the latter aimed at developing residential, alternative and hotel projects- remain very attractive to investors".
In its report, the consultancy presents a market analysis by property investment segment:
Offices
Lisbon
In the first half of 2023, the Lisbon office market recorded a take-up of approximately 38,321 square metres, a sharp drop of 77% compared to the first half of 2022. "This drop proves to be more significant due to the comparative basis with the year 2022, where historic results were achieved, highly driven by the closure of large and unprecedented pre-letting and owner-occupier operations," says Savills.
Between 2024 and 2025, approximately 200,000 square metres of new space are already planned, with more than 60,000 m2 already earmarked for owner-occupation.
"Despite the sharp drop in the office segment, the end of the second quarter of 2023 demonstrates its resilience in the face of challenging market conditions. There is, in fact, a shortage of quality office space available which, combined with strong demand from companies that prioritise ESG and sustainability criteria, ends up exerting greater pressure on this market," says Frederico Leitão de Sousa, Head of Offices, Savills Portugal.
Porto
In the first half of the year, Porto's office market saw a total take-up volume of 25,184 m2. Although take-up was 17% lower than in the same period last year, it was 9% higher than the average take-up over the last four years. This result was achieved by closing 32 operations, including 7 operations of more than 1,000 m2.
By the end of 2023, approximately 35,700 m2 of new office space is expected to be completed, with the 'Out of Town Zone' receiving around 19,000 m2. In the first half of 2023, 5 projects were completed totalling just over 25,000 m2.
"The construction of new office projects has helped to attract a diverse range of companies from different sectors and nationalities. This trend is particularly noticeable in areas close to Porto, such as Matosinhos. All these factors make Porto an increasingly attractive destination for companies looking to establish a presence in a dynamic and forward-thinking market," says Graça Cunha, Offices Associate at Savills Portugal's Porto division.
Industry & Logistics
At the end of the first half of 2023, the national Industrial & Logistics market saw a total take-up volume of approximately 308,000 square metres, which represents a very significant increase of 93% compared to the same period in 2022.
"Despite the uncertain economic climate, the Industrial & Logistics segment has seen very significant growth in Portugal. The scarcity of available property and building space, combined with high demand, are the sector's biggest challenges today. However, these factors have also led to greater attention being paid to this segment of real estate, with an increase in projects offering higher quality standards," emphasises Pedro Figueiras, Head of I&L at Savills Portugal.
Retail
Retail sales in Portugal grew by 3.1% year-on-year in May 2023, up 0.6 p.p. on April 2023 (2.5%), the highest annual increase in the last four months. The food products segment saw an increase of 2.8%, while non-food products rose by 3.2%.
E-commerce is one of the agents responsible for the segment's growth, with forecast revenues of around 4.72 billion euros in Portugal by the end of 2023. By 2027, this parameter should reach a volume of 7.36 billion euros. At the same time, by 2027, the number of e-commerce users in Portugal is expected to reach 5.82 million.
"After two years of severe restrictions, retail emerged in 2023 in a new context. Life has changed, the type of customer and their needs have changed and retail has adapted in a resilient and surprising way. As we know, one of the main success factors for retail activity in Portugal is tourism, which has unequivocally boosted the growth of the catering offer, especially in the cities of Lisbon and Porto," emphasises José Galvãs Portugal.
Residential
During the first half of 2023, the number of residential property transactions fell by 19% compared to the first half of 2022, from 82,752 properties sold in mainland Portugal to 66,624 deals closed so far.
At the end of the first half of 2023, the Portuguese capital was responsible for most of the transactions, accounting for 4,387 homes sold, a difference of 27% compared to the first half of 2022 (5,963).
"These figures are not surprising, given that the market is still in a period of greater caution and consideration on the part of potential buyers. In addition, the constant increases in interest rates, stricter bank financing rules, housing affordability and demographic changes have all weighed heavily on the decision. However, the high-end and high-end markets have been performing well and growing steadily," explains Miguel Lacerda, Lisbon Residential Director.
Porto, on the other hand, registered 2,969 deals and closed the first half of the year with a 19% drop compared to the same period in 2022.
"The figures for the first half of the year were to be expected. However, the Porto market continues to show great resilience and is one of the destinations of choice for people and companies from other countries who choose the city to live and work in. As a result of the major development of the city's urban fabric, the outlook for the region's market is very encouraging," says João Leite de Castro, Commercial Director, Savills Porto Division.
In the first half of the year, the average sale prices of new properties in Greater Lisbon, Greater Porto and the Algarve reached 5,847€/m2, 4,127€/m2 and 4,879€/m2, respectively.
Tourism
By June 2023, more than 34 million overnight stays had been recorded in Portugal, which represents growth of around 11% and a record in the number of overnight stays accumulated in the first half of the year compared to the same period in 2019 (30.8 M). Foreigners account for 71% of all stays so far, while domestic tourism accounts for the other 29%.
During the first half of the year, Portugal welcomed a total of 13.6 million guests. With regard to the evolution of tourists in the country, there was a 10% increase in the cumulative number of travellers when comparing the figures for the first half of 2023 and the first half of 2019 (12.2 M).
In the first half of the year, 59 new hotels opened, totalling 2,800 rooms, 80% of which are located in Greater Lisbon, the Alentejo, Porto and the North.
