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First quarter 2024

Property investment in Portugal reaches €261m

Property investment concluded the first quarter of 2024 with a transaction volume of €261 million, reflecting a slight decrease of 6% compared to the same period in 2023. This is the conclusion of a recent market analysis by Savills.

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Investment
Approximately 75% of the total investment volume was allocated to the retail and office segments, highlighting the resilience and activity in these sectors within the national real estate market.

Regarding the office segment, the most significant transaction in the first quarter of 2024 was the sale of the Key Tower in Parque das Nações by Krest to the German fund Real I.S. This marks the fund’s inaugural venture in Portugal with the acquisition of one of Lisbon’s most modern buildings. The sale of Sintra Retail Park, a key player in the national retail park market, was also noteworthy, reaffirming investors’ renewed interest in this segment.

The hotel segment continues to garner significant interest. Notable transactions include the sale of a resort in the Algarve, valued at €21 million, and a portfolio of hotels with units located in Greater Lisbon. These transactions underscore the continued dynamism and importance of the hotel segment within Portugal’s property market.

In the industrial and logistics sector, transactions totalled €10 million, signalling a contraction in activity. This reflects the ongoing counter-cyclical trend, where the robust performance of the occupancy market contrasts with the investment market, anticipating the introduction of prime products into the market.

International investment dominated, constituting 70% of the total volume, while domestic investors contributed 30%, maintaining a steady growth trajectory.

Property investment and asset management funds played a pivotal role on both the buyers’ and sellers’ fronts, significantly influencing the total investment volume.

Paulo Silva, Head of Country at Savills Portugal, highlights: “The property market kicked off 2024 with a sense of caution and reserve, mirroring the macroeconomic climate and investors’ apprehension. However, this year, investment and risk diversification strategies, particularly focused on the residential sector, are poised to invigorate the national property market, buoyed by increasing interest in the hotel and retail segments.”

Offices – Lisbon
The first quarter of the year ended with a total absorption volume of approximately 74,000 sq m, which is a significant increase compared to the 19,264 sq m recorded in the same period in 2023.

Of the total of 41 operations carried out, 12 had areas of more than 1,000 square metres, accounting for 86% of the total take-up volume. The Parque das Nações and New Office Zone areas recorded the best performances in terms of occupancy, with 28,670 and 26,120 sq m,respectively, which represents 74% of the total take-up volume.

In turn, the availability rate closed at 10.02%, a slight increase on the 9.33% seen in the last quarter of 2023, a result due to the vacating of obsolete office space that needed intervention to adapt to ESG criteria.

As far as market trends are concerned, the flex office concept is in the spotlight, since in the 1st quarter there was a total occupancy of 6,279 sq m of flexible space. This type of office is increasingly sought after by tenants who want to be in spaces that can be easily adapted to different needs, while offering a collaborative and creative working environment.

Prime rents remained stable at 28€/m2/month, with Lisbon in third place in the ranking of European cities with the most competitive rents. In terms of the pipeline, 135,000 square metres are expected to be completed by the end of 2024, 55% of which are already occupied.

Frederico Leitão de Sousa, Head of Offices, Savills Portugal, emphasises: “It is with great enthusiasm that we are witnessing a strong recovery in office market activity to figures similar to the pre-pandemic context. The fundamentals of the national market continue to be in evidence, with an increasing number of companies coming from new markets, namely the USA and Northern Europe. Its strategic location in Europe, the high level of security, accessibility and qualified talent make Portugal one of the most attractive destinations for investing and setting up operations.”

Offices – Porto
In northern Portugal, in the first three months of the year, Porto’s office market absorbed 18,040 square metres, a figure that represents a historic increase of 135%.

A total of 22 operations were carried out, 6 of which were over 1,000 square metres and accounted for 70% of the total volume of absorption.

The Out of Town Zone, which includes the Matosinhos, Maia and Vila Nova de Gaia markets, recorded the best performance. Of the 8,061 sq m occupied in this zone, 7,827 were absorbed by the Matosinhos market.

The prime rent indicator recorded an upward trend, closing Q1 at 19€/m2/month (+5.5% compared to Q4 2023), as a result of high-quality products being placed on the market. It’s worth noting that, compared to other European cities, Porto is the city with the most competitive rents, ahead of Warsaw, Lisbon, Athens, and Barcelona.

Graça Ribeiro da Cunha, Offices Associate, Savills Portugal | Porto Division, emphasises: “The figures for the first quarter of the year leave no room for doubt that the office market has been showing robust and dynamic activity. Proof of this was the fact that Porto achieved its highest take-up volume in the last five years compared to the same period last year. On the other hand, the fact that Porto is the European city with the most competitive rents is an excellent argument for companies considering our market for their business.”

Industrial & Logistics – Lisbon
In Q1 2024, the national Industrial & Logistics market totalled 25 deals with a total take-up volume of 150,000 sq m, a figure that translates into a 38% drop compared to the same period in 2023.

However, compared to the average take-up over the same period in the last three years, there was an increase of 18%, indicating an upward trend in occupancy levels.

In the Greater Lisbon region, 11 deals were finalised for a total of approximately 57,000 sq m, with expansion needs motivating 98% of the operations.

Contrary to what was observed in 2023, when more than 50% of deals were closed on the prime Azambuja - Vila Franca de Xira and Alverca - Loures axis, in the first three months of 2024, 49% of deals were closed on the axis between Palmela and Setúbal.

As far as the pipeline is concerned, between 2024 and 2026, more than 600,000 sq m of projects in the Greater Lisbon area, with around 50 per cent of the new supply concentrated on the main Azambuja - Vila Franca de Xira axis.

At the moment, around 55 % of this area has already been earmarked for owner-occupation or pre-letting contracts.

Industrial & Logistics – Porto
By the end of Q1 2024, the North and Greater Porto region had 72,000 sq m occupied as a result of 8 transactions, representing a 95% increase compared to the same period in 2023.

In 2024, the pipeline for this region totalled 115,000 sq m spread over two projects, with Panattoni Park Valongo standing out with 75,000 sq m and an expected completion date in Q3 2024.

Pedro Figueiras, Head of I&L, Savills Portugal, points out: “In terms of Industry & Logistics, as we know, Portugal has a shortage of quality product supply, reaffirming its difficulty in responding effectively to growing international demand. The pipeline in Greater Lisbon and the North/Porto region, and the respective pre-occupancy rates, demonstrate the growing dynamism of this market.”

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