IBERIAN PROPERTY TALKS - 2024 PORTUGAL INVESTMENT OUTLOOK
Why Portugal?
On the morning of the 4th of September, an intimate group of investors were gathered in an Editorial Breakfast organised by Iberian Property, which counted with the support of Morais Leitão. At the law firm offices in Lisbon, the consensus was that facing a slowdown in capital markets activity, contrary to what could be inferred, investors are confident about the market and occupational markets are offering an extra sense of optimism.
The event featured Investment funds, Consultants, Lenders and Lawyers, contributing towards the goal of discussing the trends and challenges that will shape the near future of the sector.
The main consultants present started by sharing their views on the different sectors, from which Francisco Horta e Costa, Managing Director of CBRE Portugal, highlighted the Hotel market and the growing interest in the Student Housing segment and in acquiring land for several Livingformats.
His forecast is that the total volume of investment in Portugal will reach the end of the year below 2 billion euros (probably between 1.6 and 1.8 billion), which contrasts sharply with previous years where the 3-billion-euro mark was surpassed.
On the other hand, regarding Offices the view is that the price gap persists, but take-up has already surpassed last year's levels, despite the absorption being concentrated in just a few operations.
Paulo Silva, Head of Country – Portugal, Savills, added that prime yields in offices are expected to stabilize, backed by an increase in the number of transactions, showing overall signs of recovery of the market. Still, in his opinion the Industrial & Logistics is one of the segments that deserve most attention as developers are very active and with serious plans to bring hundreds of thousands of square meters into the market in a short period of time.
Regarding Retail, Eric van Leuven, Head of Portugal at Cushman & Wakefield, explained that so far the shopping centres sold were in distress situations, nonetheless bigger and important assets should come into the market, especially considering what is already happening in Spain (that many times affect the Portuguese trends as well).
Gonçalo Valente, Head of Business Development at JLL Portugal, pointed to market volatility remaining a concern, exacerbated by recent events such as the stock market crash in August.
More optimistic was Ricardo Reis, Real Estate Partner at Deloitte, who described the current momentum as a “turning point”. He believes we will soon witness an increase in both number of transactions and returns of the real estate assets. On what respects to the general wait-and-see approach he recalls that some investors will be forced to sell when the moment to refinance the portfolios arrive.
Building capacity at stake
From the investment funds perspective, Francisco Sottomayor, CEO of Norfin, expressed concern about the uncertainty surrounding building capacity. “It’s no longer just a matter of construction costs, a move like the increase of construction by the state could exacerbate the shortage of contractors, affecting private investors who are already struggling to reconcile the numbers”.
Pedro Coelho, Chairman of Square Asset Management, reaffirmed Portugal's attractiveness as an investment destination, evidenced by some transactions already being closed at yields below those seen in neighbour countries such as Spain and Italy. Besides that, he highlighted the country's current trade surplus, which positions Portugal as a favoured destination for long-term investments.
“If being a peripheral country was an obstacle before, today thanks to the internet and better infrastructure, to which add every crisis that has happened in Eastern Europe, our geolocation proved to be an advantage. Companies want to establish themselves here, and to give you an idea, of the five pure industrial units (factories) we have, four of them are asking us to expand their area”.
Among the underlined advantages, energy and financing popped up as favourites. The energy in Portugal has gone from being one of the most expensive to one of the cheapest in Europe, and the high percentage of renewables is a factor that can further boost investment. On the other side, Pedro Seabra, Senior Partner at Refundos Explorer, highlighted the ease of access to finance in the country, with very competitive conditions for both financing and refinancing operations compared to other European countries.
So after all, what’s the story Portugal has to tell?
Going around the table to collect the main conclusions, the idea that persisted was that the country is now in a better position, still the challenge of justifying the spread remains. Volkert Reig Schmidt, Managing Director of Novo Banco Real Estate, stressed that for institutional capital is not the same investing in a german secondary city or a Portuguese one. “The scale and asset liquidity are very hard to overcome in a small country, and Portugal still needs time to show investors that the legislation is solid and investor friendly. Take the simplex example, looks like a step in the right direction to speed up processes, but the measure is very recent to present correlated results”.
The Portugal Real Estate Summit, taking place at Estoril on the 23rd and 24th of September, is the place to deepen the discussion and to draw solutions as one united industry.
In the third IP Talks of 2024, under the format of an Editorial Breakfast, Iberian Property counted with the support of Morais Leitão who was so kind to host the event in its offices in Lisbon.