In 2022, the Portuguese real estate market is expected to continue to recover, after two years of a pandemic, and despite new geopolitical uncertainties. After last year's 2,162 million euros, the volume of investment in commercial real estate is expected to reach 3,200 million euros, equaling the all-time high of 2019.
In its Marketbeat Spring 2022 report, Cushman & Wakefield predicts that, in a context of gradual recovery of investment activity in income real estate, this amount will be reached again, which will represent an increase of 47% compared to 2021.
C&W highlights in its report that, during the past year, and especially in the second half of the year, the real estate market recorded a general increase in its main indicators, although still below pre-pandemic values. And despite the current uncertainty about the real impact that the conflict in Ukraine will have on the economy, “expectations are for a continuous transversal recovery during the current year, even being able to equal the historic maximum of 2019 in the commercial real estate investment market”.
The consultancy anticipates the maintenance of «high interest in the Portuguese market, given its attractive returns and high levels of liquidity among the largest investors». This interest “will be more focused on assets in prime locations, with good contracts and solid tenants, but the gradual recovery of occupational markets will help the return of transactions of less consolidated assets”.
On the other hand, the investment market is not very exposed to investment originating in Eastern European countries, and therefore «no noticeable negative impact is anticipated as a result of the current conflicts in this area», although there is still a risk of the «effect that they may have in the main European investor markets in Portugal, with a possible increase in decision-making time».
It is also worth noting, as a trend for 2022, the growth of investors' focus on ESG (Environment, Social and Governance) criteria, namely core investment funds If previously these criteria were seen as an added value for assets, today they are , increasingly, mandatory requirements, “which may exclude real estate from the acquisition options of large investors, with a direct effect on the respective price”, warns C&W.
In the forecasts for this year, although the foreseeable sale of the ECS portfolio could influence the greater weight expected in the hotel sector, with close to 30%, offices should once again represent the majority of the investment, representing 1/3 of the volume traded. Retail should recover, representing 20% of demand.
Different market segments in recovery
In its report, C&W highlights a general recovery trend across the various market segments. This is the case of offices, which expect a continuous increase in occupancy volumes in the short term, with the demand for quality spaces justifying higher rental values in certain areas, “residual increases may even occur”.
Retail continues its recovery trend at the beginning of 2022, with demand levels similar to 2019. High street shopping in Lisbon remains very active, namely on the part of luxury brands, and Porto continues to be boosted by both luxury and mass market. Retail parks stand out with very high demand, as do restaurants and fashion. But C&W warns that "recent military developments in Eastern Europe could reduce consumer confidence, and consequently temporarily suspend some decision-making processes out of the utmost caution of occupiers."
The industrial and logistics market, which was extremely active in 2021, should continue to experience pressure from operators in the area of urban logistics, namely for spaces close to the centers of Lisbon and Porto. The search for land for development and spaces for conversion will continue. Data centers in Portugal are also expected to grow, supported by increased demand, including international investment funds representing companies operating in this area and wishing to take advantage of our country's privileged geographical position.
In the hospitality industry, the easing of restrictions on the movement of tourists is encouraging. It should continue to recover in 2022, with the main indicators registering a new year-on-year growth and with operators reporting reservations for this year already above last year. Again, the situation in Ukraine may have some impact on this evolution, due to the instability generated and the potential increase in prices, including fuel.
The residential market has also been recovering, after the first impact of the pandemic, and the growth of the PRS, or Private Rented Sector, is one of the trends for this year, due to the scarcity of supply in urban centers and the flexibility it offers, but also as a real estate investment product, which enhances the development of Build to Rent projects. The purchase and sale segment should continue to be marked by the entry of a new product for the medium and medium/high segment and by the gradual increase in the difficulty of accessing credit.
