The current macro environment brings direct challenges, especially on costs, and a higher level of uncertainty to the forecasts, which are fundamental in the investment decisions. Having this said, we are still experiencing a very positive market feeling from most of our clients, which is supported by the performance indicators either on sales of end units, take up on the occupational markets and investment volume already secured in 2022. Portugal continues to have a big mismatch between offer and supply, on the vast majority of sectors, which contributes to an above average resilience on prices.
Development and Value-Add plays are being supported by a thesis that by the time the finished product come to market, the current negative momentum related to the war will be over, or closer to an end, with the market on a recovery curve.
After the 2008 financial crisis, Portugal has finally established its position on the “global investment map”. This was mostly due to the huge increase in demand for real estate, coming both from the domestic market and the ever-increasing international demand, fueled by some programs and tax benefits to attract FDI, such as the Golden Visa program, the Non-Habitual Residents Tax Benefits and sector incentives like the Rehabilitation tax benefits. The “perfect storm” formed by combining these factors with an increase in awareness of our country as a top tourism destination. Since then, the market has blossomed and the investment captured in real estate can today be witnessed in the landscape of our cities, as well as some costal locations or countryside, and experienced in our daily activities like restaurants, theaters, public transports and other services that have contributed to a more modern and connected country.
By offering all of the above, together with highly educated and capable workforce at a very competitive level of salaries, Portugal has been also able to attract multinationals and new companies, which has improved the corporate landscape in our market and, again, contributes to the international “hype” around our country.
This is an almost perfect ecosystem for investment, capitalizing this momentum on a performing market while producing very interesting returns to the investors, in practically every asset class.
The volatility on our public policies, the not so fast legal procedures and heavy tax burden all around are the main challenges to continue to attract even more foreign investment. The market needs clear cut and fast implementing policies to further incentivize investment, which will definitely translate into more supply, therefore increasing the size of our market and bring stability to prices.
Living Sector – here to stay!
Over the last decade investors’ preferences have been gradually changing.
New concepts of living product to address different needs throughout our life cycle are being developed, sought after by users and investors, and being designed to co-exist with more traditional commercial real estate. Our market is adapting to the end users’ needs and trends and the investors are very keen on taking part in this story.
Regarding Multifamily, in Portugal we’ve had a cultural hurdle since the 80s, where fueled by the mortgage sector the Portuguese buy instead of renting. This translates into a current market where over 70% of the households are own by the occupiers. This trend has continued till this day, especially due to the low interest rates, having as exceptions some foreign that move to Portugal, a percentage of the younger generations – who prefer to use instead of own – and the fringe of the local population that cannot access bank financing for purchasing their home.
The current rise in interest rates can help driving more demand to the rental market in Portugal, increasing its depth, volume and, therefore, be even more attractive to investors.
Shaping the future of real estate for a better world
We have different important drivers that we focus on and, at JLL, we are working every day and in all our 360º integrated services to live up to our purpose “we shape the future of real estate for a better world”, by working on these 3 pillars:
The first is sustainability, a concept that has long been part of our operations. In a survey of JLL's clients in EMEA, we found that in Portugal 82% of active operators say they intend to move forward in their commitment to sustainability, a higher percentage than in Germany, Spain, or France. Compliance with ESG rules is already becoming one of the unavoidable criteria in property selection and has really become one of the key points in the real estate sector and one that companies, and investors have nowhere to run.
We are also focusing on the new trends redefining workspaces, change management, where the challenge is to provide integrated solutions to companies so that they can rethink their spaces, make them more collaborative, social, attractive, and able to retain talent, especially at a time when we are reconsidering ways of working, adapted to the post-pandemic.
Finally, technology and digitalisation are also a key theme. Our business needs to be much more digitised and have more technology platforms to give our customers easy access to data, providing them with digital solutions that can help them make better decisions about their assets in record time. There is still room to grow in this area, and we are putting a lot of effort into it. We want to give our customers more solutions to speed up the decision-making process.