At the close of 2022, the volume invested in Portuguese commercial real estate is estimated to have reached 3,000 million euros, 39% higher than last year, and close to the best years of the market, Cushman & Wakefield calculates.
In its presentation of its 2022 balance sheet and outlook for 2023, the consultancy firm points out that investors continue to focus on strategic sectors, namely hotels, which represent around 30% of the volume invested, following the sale of the Crow Portfolio for around 850 million euros, followed by offices, with 27% of the total invested.
Last year, 76% of the total volume invested in commercial real estate was of foreign origin. Also of note is the weight of the industrial and logistics sector, which represented almost 600 million euros of investment, about 10 times more than the investment values of previous years, and also the greater affirmation of alternative sectors among international investors, which represent 12% of total investment, thanks largely to the purchase of Smart Studios by Round Hill Capital for 200 million euros.
Besides the Crow Portfolio, the main transactions included the acquisition by Sonae Sierra and Bankinter of the Atrium Saldanha building from the Fibeira Group for 205 million euros; the acquisition by the Castel Group from Explorer of a portfolio of three office buildings located in Lisbon for between 110 and 120 million euros; and the acquisition by Merlin Properties of the former headquarters of Novo Banco, on Avenida da Liberdade, for 112 million euros.
C&W alone was involved in transactions that represent 29% of the volume transacted in the office and logistics sector (what it calls "business space"), and 38% of the volume in the retail area. 2022 was also one of the best years ever for the consultancy firm, which increased its turnover in Portugal and launched new service lines Design & Build and Sustainability & ESG.
In its presentation, the consultancy highlighted that the year began with the pandemic under control, but was soon shaken by the start of the war in Ukraine. Meanwhile, inflation and rising interest rates took hold, but even so, the year remained "very active until the end", said Eric van Leuven, managing director of C&W in Portugal.
Investment slowdown. Higher Yields, lower prices
2023 kicks off with a pipeline of known investment deals of around €2bn, similar to that recorded at the same time last year. But Paulo Sarmento, Head of Transactional Services, highlights that the context is "less solid", at a time when "we are in a phase of price discovery and adjustment of values between buyers and sellers". Eric van Leuven speaks of a "mixed feeling" and the fact that Portugal has been "little affected by the uncertainty and apprehension of Northern Europe, especially Germany and the United Kingdom, which are the countries that define investment in Portugal". He considers that "the rise in interest rates and the greater difficulty of financing result in a climate of uncertainty about the real value of assets, which in turn will delay investment decisions until there is greater clarity. It seems obvious that yields will expand, resulting in lower sale values. On the other hand, Portugal remains firmly on investors' radar showing positive fundamentals which makes it very well positioned for recovery".
Paulo Sarmento summarises that investors thus adopt a "wait and see" posture, as everything will depend on the economy and the availability and cost of financing, which is "fuel for investment". In the worst case scenario, several transactions may be postponed or cancelled. Either way, it is expected that the first half of the year will be one of greater caution and postponement.
Record year for office take-up
In 2022, the office sector registered a significant increase in take-up of 88% in Greater Lisbon, reaching a new all-time high of around 300,000 square metres, C&W calculates. Porto, meanwhile, registered a 30% rise in occupancy, to 52,700 square metres. There continues to be a great lack of new, more modern buildings.
Despite continuing to register a lot of activity, the industrial and logistics market registered a lower take-up volume in the first three quarters of 2022 than in the same period of 2021, with a total of 332,400 square metres placed, distributed among nearly 50 businesses, with an average area of 6,700 square metres per operation. Investment in quality supply increases, through rehabilitation or development of new projects, and Paulo Sarmento highlights "the greater importance of property development compared to previous years. Large logistics developers have finally arrived in Portugal".
Retail, meanwhile, improved compared to 2021, despite the number of openings being slightly below the previous year, with the high street representing 64% of the total. The area inaugurated was higher, with restaurants accounting for 46% of total occupancy. In the pipeline are several expansions of existing shopping centres, including Colombo Shopping Centre, which should start this year, and the opening of new retail parks.
Note also for hotels, which recorded a strong recovery compared to 2019, with increases in total revenues, occupancy rate and RevPAR (11%), despite fewer overnight stays. In 2022, 44 new hotels were opened with around 2,600 rooms, more than half with a 4-star classification. Around 115 new units are in the design and/or construction phase, with a total of 9,900 rooms, to open in the next 3 years.
