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52 // iberian.propery / 2017
dossier// ISSUE: TOP IBERIAN cities
João Cristina
SILCOGE
General Manager
Nuno Nunes
CBRE
Head of Capital
Markets
3 questions you should ask
before investing in Lisbon:
A pool of experts answers three key ques-
tions, predicting how they expect investment
in Lisbon to evolve over upcoming months.
1
Would you recommend
investing in Lisbon today?
What is the principal reason?
Today, Lisbon is a recommendable desti-
nation for private investors and institutional
money. The fact that the capital values are
cheaper comparatively to their European
peers, makes it a natural arbitrage destination.
That is the advice we give numerous inves-
tors every day. There are various sectors
where dynamic demand far outweighs the
available supply, such as offices and high
street retail on the main retail axes. A large
part of this increase in demand is not due to
economic factors or trends, but to an effective
change in Lisbon’s international positioning
as a leading city for leisure and business.
2
Do you believe the market will
continue to appreciate over the
next 12 months?
Will that appreciation
occur mainly through yield
compression or a rise in rents?
There is still room for value increase in the
next 12 months and the market should con-
tinue to performvery positively. The increase
will most likely come from rental growth,
due to supply shortage, rather than from
compression of yields, as interest rates are
already very low.
Assets should continue to appreciate sig-
nificantly over the next 12 to 24 months.
Commercial real estate yields are still drop-
ping. However, we believe that compression
will not be too significant in the medium
term, and will most likely stabilise. On the
other hand, dynamic demand and a lack
of supply suggests that rents will rise sig-
nificantly, especially in prime locations and
in assets with the best technical features.
3
What is the main investment
barrier?
The biggest investment barrier is the high
level of taxation and the ever-changing legal
framework. Capital typically prefers to stay in
those jurisdictions that allow for foreseeability
of investments and efficient capital allocation,
rather than countries that have an arbitrary
and random approach to investment. Portu-
gal should create conditions for capital inflow.
The usual constraints in the Portuguese
propertymarket, such as high taxation and
granular investment, have been overcome
or minimised. The only barrier that is reg-
ularly noted by investors regards the diffi-
culty to obtain bank financing to support
investment, even in prime assets with good
tenants and solid leases.