Lisbon Unable to Accommodate Large Companies

12 March 2018

The 0.7% of new offices that are still available cannot absorb the growing demand by companies interested in moving to, or expanding, in Lisbon. They often opt for other cities, due to the lack of space in Portugal’s capital.

According to Prime Watch, its annual report on the commercial real estate market, the consultancy B. Prime also notes that rents in the market continue to increase, but the growth has yet to strike a balance between supply and demand.

The report also states that there has been a significant increase in pre-leasing by larger companies that are able to circumvent the lack of modern buildings and meet the occupancy requirements that such companies seek. This trend accounts for 71% of the building area under construction, but such strategies are outside the reach of most SMEs.

The study warns that specific locations already have no remaining space, including Zone 3 (Praça de España, 2nd Circular) and Zona 5 (Parque das Nações).

The commercial real estate investment market, which saw record sales of 1.9 billion euros in 2017, continues to attract the interest of foreign investors, for various reasons. One of which is that the yields that can be found in Portugal continue to be superior compared to other European countries.

The United Kingdom has returned to the top of the list of foreign investors in the country with a market share of 23%, but the study highlights the growth of national investors who have recently begun taking greater advantage of existing opportunities.

The retail and office sectors accounted for 81% of the transactions in Portugal.

B. Prime also analysed the performance of real estate investment funds in Portugal, which reached a turning-point in 2017. “The amount under management through these instruments reached 10.7936 billion euros. Both the open and closed funds maintained their preference for services-based real estate, maintaining a 45.1% share and 31%, respectively. The robust performance of the national economy has been taken advantage of, as evidenced by the significant decrease in the indebtedness of both open and closed FIIs,” the consultancy clarified.

Original Story: Diário Imobiliário

Translation: Richard Turner