Real estate in Portugal: 8 % decrease in investment in the first half of the year.

In the first half of the year, investment in commercial real estate in Portugal totaled 765 million euros. Compared to the same period in 2022, this is an 8% drop, according to a report by consultancy Savills. "The key market drivers in the first 6 months of the year should continue through the end of 2023 as rising interest rates continue to weigh on investor expectations, causing a delay in decision making. Nevertheless, the market remains liquid for real estate investments," explains Paulo Silva, head of Savills Portugal.

According to the person in charge, "office, industrial and logistics assets remain the preferred asset classes for investors, but the lack of quality product and sellers' expectations are limiting transactions in these markets." On the other hand, "value-add and development assets - the latter designed to develop residential, alternative and hotel projects - continue to be in demand by investors. "

Offices

Lisbon

In the first half of 2023, the Lisbon office market showed a rental volume of approximately 38,321 sqm, a 77% decrease compared to the first half of 2022. "This decline is more significant due to comparisons with the historic 2022 results, which were strongly spurred by the conclusion of large lease and owner-occupier deals with no prior precedent," says Savills.

From 2024 to 2025, around 200,000 sqm of new office space is already planned, of which more than 60,000 sqm is already earmarked for own use.

"Despite the sharp decline in the office segment, the end of the second quarter of 2023 shows its resilience in a challenging market. In fact, there is a shortage of quality office space, which, combined with strong demand from companies prioritizing energy saving and sustainability criteria, is creating additional pressure in this market," says Frederico Leitao de Sousa, head of Savills Portugal.

Porto

In the first half of the year, Porto's office market summed up a rental volume totaling 25,184 sqm. Although rental volume was 17% lower than the same period last year, it was 9% higher than the average rental volume over the past four years. This result was achieved by closing 32 deals, including 7 deals over 1,000 sqm.

At the end of 2023, around 35,700 sqm of new office space is expected to be completed, with around 19,000 sqm planned in the 'Out of Town' zone. In the first half of 2023, 5 projects were completed for a total area of slightly more than 25,000 sqm.

"The construction of new office projects attracts a wide range of companies from different industries and countries. This trend is particularly pronounced in areas close to Porto, such as Matuzinhos. All these factors make Porto an increasingly attractive location for companies looking to carve out a niche in a dynamic and promising market," says Graça Cunha, Savills Portugal's representative in Porto.

Industry and logistics

By the end of the first half of 2023, the national industrial and logistics market showed a rental volume of approximately 308,000 square meters, a very significant increase of 93% compared to the same period in 2022.

"Despite the uncertain economic environment, the industrial and logistics segment in Portugal continues to show significant growth. Lack of available real estate and building sites, as well as high demand, are the main challenges for the sector at present.

Retail Trade

In May 2023, retail sales in Portugal grew by 3.1% year-on-year, an increase of 0.6 pp. compared to April 2023 (2.5%), and recorded the highest annual increase in four months. The food segment grew by 2.8%, while non-food products grew by 3.2%.

Electronic commerce is one of the growth drivers for this segment, with projected revenues of around EUR 4.72 billion in Portugal by the end of 2023. By 2027, this figure should reach a volume of 7.36 billion euros. In parallel, the number of e-commerce users in Portugal is expected to reach 5.82 million by 2027.

"After two years of strong restrictions, retail is reborn in 2023 in a new context. Life has changed, the type of customer and their needs have changed, and retail has adapted steadily and amazingly. As we know, one of the main factors for the success of retail activity in Portugal is tourism, which has clearly contributed to the growth of the restaurant offer, especially in Lisbon and Porto," emphasizes José Galvão Portugal.

The residential sector

In the first half of 2023, the number of residential real estate transactions decreased by 19% compared to the first half of 2022, from 82,752 properties sold in mainland Portugal to 66,624 transactions so far.

By the end of the first half of 2023, Portugal's capital was responsible for the majority of transactions, with 4,387 residential properties sold, a decrease of 27% compared to the first half of 2022 (5,963).

"These figures are not surprising as the market is still in a period of greater caution and deliberation on the part of potential buyers. In addition, constant increases in interest rates, stricter bank financing rules, housing affordability and demographic changes are factors that strongly influence the decision. However, the high-end and premium market continues to perform well and show continuous growth," explains Miguel Lacerda, director of Lisbon Residential.

Porto, for its part, recorded 2,969 transactions and ended the first half of the year with a 19% decrease compared to the same period in 2022.

"The figures recorded in the first half of the year were expected. However, the Porto market continues to show great resilience and remains one of the preferred destinations for people and companies from other countries who choose the city to live and work in. Thanks to the active development of urban infrastructure, the outlook for the regional market is very encouraging," says Joao Leite de Castro, commercial director of Savills Porto Division.

In the first half of the year, average prices for new properties in Greater Lisbon, Greater Porto and the Algarve were €5,847 per square meter, €4,127 per square meter and €4,879 per square meter, respectively.

Tourism

By June 2023, Portugal had more than 34 million overnight stays, an increase of around 11% and a record number of overnight stays in the first half of the year compared to the same period in 2019 (30.8 million). Foreigners account for 71% of total stays so far, while domestic tourism accounts for the remaining 29%.

Only 13.6 million guests visited Portugal in the first half of the year. Regarding the number of tourists in the country, an increase of 10% was registered in the accumulated number of travelers when comparing data from the first half of 2023 and the first half of 2019 (12.2 million).

In the first half of the year, 59 new hotels opened, totaling 2,800 rooms, with 80% of these new properties located in the Greater Lisbon region, Alentejo, Porto and the North of the country.