Retail Market: A Magnet for Foreign Investment as Shopping Centers Shine

On the morning of the 30th of October, an exclusive group of investors were gathered in an Editorial Breakfast organised by Iberian Property, which counted with the support of PLMJ. At the law firm offices in Lisbon, retail experts discussed the factors driving this interest and highlighted trends pointing to further growth and adaptation in the market.

Pedro Siza Vieira, Partner at PLMJ, and former Minister of Economy at Portugal, kicked-off the discussion projecting that as the country’s economy continues to grow and disposable income increases, consumption will remain strong, supporting the retail sector’s expansion.

Providing some Iberian investment insights, Alexandre Lima, Director at Iberian Property, shared that Retail is the winning asset classes in Iberia in 2024. Featuring €1.90 billion invested, the sector presents the largest volume of transactions until September, with a share of 28%.

Ricardo Regada Pereira, Partner & co-Head of Real Estate at PLMJ, highlights that the profitability and resilience of Portuguese SCs have become central to attracting international capital. “The performance of SCs has been extraordinary, and we expect at least three additional shopping transactions by year-end,” he explains. Ricardo Regada Pereira noted that South African investors are especially drawn by stable high yields and the expertise they bring to asset management. Unlike traditional European core funds, these investors have an operational focus that can directly impact shopping centers valuations.

On its behalf, Carlos Récio, Senior Director A&T Services Retail at CBRE Portugal, emphasizes that Portugal’s retail market ranks among the most attractive in Europe due to its economic stability and high-quality management. “The country’s stability and economic security are key”, he stated, adding that Portugal hosts some of Europe’s best-managed shopping centers, with prime rents around €90/sqm and a steady trend of rent growth. Besides that, the demand is not merely localized in Portugal but reflects a broader trend across the Iberian Peninsula, where robust management and number of visits are consistently pushing up asset values. Of a ten-mall portfolio recently put up for sale, four malls have already been transacted., indicating strong demand.

Luís Arrais, Property Director Iberia at Nhood, highlighted that overall the company’s managed centers have experienced a 5% increase in visitors and an 8% rise in sales over the past year compared to pre-pandemic levels, with occupancy rates now hovering around 98%. “This level of resilience is notable, particularly as Portugal has outperformed other European countries like Germany and France,” Luís Arrais argued, positioning Portugal as a prime choice for investors.

Further emphasizing this appeal, Telmo Ferreira, Head of Country Portugal at Klépierre, showcased the recent surge of interest from international investors, especially from France. “The market’s vibrancy has led to multiple inquiries from investors, something we hadn’t seen in years”. This renewed enthusiasm is also felt within Klépierre, where the Portuguese market is once again in the spotlight after a long hiatus.

Adaptability and forward-thinking management have been critical to Portugal’s retail sector success. Susana Marques, Leasing Country Manager of Portugal at Sonae Sierra, demonstrated how the company’s ongoing transformation of shopping centers directly responds to evolving consumer habits, particularly post-pandemic. “We are in the midst of transforming shopping centers, integrating leisure and services to meet these new consumer habits”, and for that Sonae Sierra has invested heavily in assets such as NorteShopping, creating a luxury area that has driven immediate returns, and the Vasco da Gama mall in Lisbon, which recently introduced a new gastronomic wing, meeting direct consumer demand for variety and experience.

The maturity of Portugal’s retail sector, according to João Cristina, Country Head of Portugal at Merlin Properties, is also key to its stability. Few new shopping centers have opened in recent years, with MarShopping Algarve in 2018 being the latest, and on the other hand, some assets, such as Porto’s LaVie, have been repurposed as business hubs. Facing this consolidated stock, "today’s competitive landscape naturally draws investor interest,” and the reliance on Portugal’s private consumption and tourism secure its attractiveness.

Interest in Portugal’s retail market extends beyond shopping centers to include retail parks, with a growing trend towards refurbishments and expansions. Carlos Récio believes that, while new shopping centers developments may be limited in the coming years, the sector will continue to prioritize upgrades. “Refurbishments are indeed the sector’s focus, while new retail parks are emerging to diversify retail offerings,” he defended, adding that this is part of a larger adaptation trend observed across the Iberian Peninsula.

Nuno Nunes, CIO of Square Asset Management, addressed the increasing competition within the shopping centres sector, drawing attention to the multiple active bidders presents for each transaction, often from a diverse pool of international investors. Furthermore, this influx of capital has sustained liquidity, with refinancing amounts reaching up to €100 million for some assets.

One other curiosity pointed out by the CIO of Square AM, relates to the performance of district capitals and smaller cities across Portugal, which are proving to have strong demand despite the demographic challenges associated with being outside of major urban centers.

Looking toward 2025, Portugal’s stability and positive economic outlook are expected to sustain high levels of retail investment. Ana Lucía Guerra, Administrator at Wider Property, highlighted the importance of the tenant-mix as part of the centers brand. She explained that alternative tenants such as health services, coworking, and sports facilities were key in times of stronger challenges to maintain high occupancy levels. Nevertheless, she believes that today only those that can sustain strong footfall and sales metrics will remain in these spaces.

Following the latest economic updates, Carlos Récio foresees a favorable match between vendor yields and buyer expectations if interest rates continue to decline, with a consequent likely increase in transactions. "As long as the economic outlook remains favorable, more deals in the sector are likely," an optimism echoed among the present sector leaders.

The consensus among industry experts was thus clear: Portugal’s retail market has established itself as an attractive and secure option for international investment. With an adaptable management approach, economic stability, and a strategic focus on meeting consumer needs, the sector is well-positioned to offer sustained growth and profitability.