Savills' latest “Real Estate Market Overview” report analyses the behaviour of the various areas of the real estate sector in the first half of 2024. At the end of the first six months, the commercial property investment market saw a year-on-year drop of 10%, with the total volume of investment in this period standing at 690 million euros.
‘More encouraging’ prospects for the 2nd half of the year
It should be noted that in the 2nd quarter the volume of investment was more robust, reaching 430 million euros, which suggests a gradual recovery. The outlook for the second half of the year is brighter, with some processes already underway expected to be finalised.
In the first half of the year, the hospitality sector led the volume of transactions, accounting for 36% of the total invested, followed by retail with 20%. Cross-border investment dominated, making up 83 per cent of the total volume, with investors from Germany, France and the United States playing significant roles. Prime yields remained stable, and the anticipation of falling interest rates could stimulate investment activity, says Savills. However, persistent challenges such as inflation and geopolitical tensions could still impact the market.
Offices - Lisbon and Porto have a very positive first half of the year
In the office segment, Lisbon and Porto stood out with positive results. Lisbon saw a take-up of 127,645 sqm, more than tripling the volume of the previous year, with the Parque das Nações area and the New Office Zone standing out. In Porto, take-up totalled 28,375 sqm, reflecting an increase of 13% compared to the first half of 2023. Demand for flexible space continues to grow, accounting for 7 per cent of total take-up in Lisbon, and four new projects added around 45,000 sqm to the office stock.
Frederico Leitão de Sousa, Head of Offices at Savills, points out that "the figures for the first half of 2024 for the Lisbon office market show a significant increase in take-up, which more than tripled compared to the previous year. The figures show that Lisbon continues to be a favoured choice for many companies and that the capital's office market, which is showing robust and dynamic growth, will continue to show resilience and potential for the future. With several quality projects in the pipeline, it is expected that the city's market will continue to undergo a profound transformation in the coming years, in order to meet the expectations and needs of occupiers".
Industrial & Logistics record remarkable performance
The industrial and logistics market also performed remarkably well, with take-up of 430,000 sqm, marking growth of 90% compared to the average of the last three years. Greater Lisbon, with a low vacancy rate of 3.52%, led absorption, and the Montijo-Alcochete logistics axis contributed significantly to the total volume. High demand and limited supply have put upward pressure on prime rents, with the prime rent on the Castanheira-Azambuja axis reaching €5.00/sqm.
Pedro Figueiras, Head of I&L at Savills, emphasises that "the Portuguese logistics market is going through a crucial phase of transformation. With the largest development pipeline in the last 15 years, the sector has attracted a significant volume of international investors who recognise great growth potential in the national market, driven by the economic recovery and its strategic location in Europe".
In the retail sector, the turnover index grew by 3.4 per cent in June, and the F&B sector accounted for more than 50 per cent of new openings in Lisbon and Porto. Prime street retail rents in Lisbon rose to €140/sqm/month, an increase of 3.7 per cent on the previous year, while in Porto they remained stable at €70/sqm/month. Interest in retail parks and supermarkets increased, reflecting the resilience of these assets.
José Galvão, Head of Retail at Savills, comments that "the performance of the retail market in Lisbon and Porto remains underpinned by the F&B sector, which plays a central role in new high street openings. Low-cost brands have also expanded their operations in Portugal, opening new shops that combine value, affordability and quality. Of particular note is investors' growing interest in the supermarket and retail park sectors, which are enjoying stability".
In the residential market, the volume of home loans fell to 1.6 billion euros in June, the lowest figure of the six-month period. Interest rates continued to fall, reaching 3.68 per cent. The number of house sales transactions fell slightly by 0.7 per cent to 65,206 units, with Porto recording significant price rises of between 7.5 and 9.4 per cent. Lisbon also saw a rise in prices, albeit more modest, between 1.8 per cent and 5.4 per cent. The rental market in Lisbon saw an increase of 5.7% in contracts, while Porto saw a decrease of 5.1%.
Miguel Lacerda, Lisbon Residential Director at Savills, notes that "the Lisbon residential market continues to be very attractive to both Portuguese and foreigners. Greater Lisbon is the area with the highest percentage of homes sold in the first six months of the year, accounting for 30 per cent of transactions nationwide, which translates into 19,451 units. On the other hand, the number of properties in the pipeline that have already been commercialised shows that supply in Lisbon continues to be scarce, which is reflected in the appreciation of prices".
In tourism, during the first six months of 2024, Portugal recorded an increase of 5.6 per cent in the number of guests and 4.5 per cent in overnight stays compared to the first half of 2023. Portuguese operators are mainly responsible for new hotel openings in the first half of the year. In addition, the Lisbon Metropolitan Area represents more than 50 per cent of the country's pipeline until the end of 2024.
Paulo Silva, Head of Country at Savills, stresses that "even with a slight decrease in commercial property investment in the first half of the year, the hotel sector stood out as having the highest volume of investment. This confirms the continued dynamism of this segment, which has shown a continued capacity to attract capital, reflecting investor confidence in the sustainability and growth of tourism in Portugal".
