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Offices Accelerate Recovery in Prime Rents in the Third Quarter

10 October 2017

In the third quarter of this year, prime rents for offices in Lisbon rose again in practically all areas, accelerating their recovery from the historic lows seen in 2013.

The Parque das Nações and the Western Corridor are areas where accumulated growth is most significant, according to JLL, with a recovery of around 30% in the last four years. In the 3rd quarter of this year, prime rents in the Parque das Nações reached 17 euros/m²/month, and in the Western Corridor, namely Lagoas Park, they reached 13 euros/m²/month, compared to 13 and 10 euros in 2013, respectively.

Mariana Rosa, director of JLL’s Office Agency and Corporate Solutions department, explains that “in the Parque das Nações, this increase is mainly due to the significant reduction of the area available over the last years, due to a dynamic demand associated with the lack of new spaces coming onto the market. Currently, the availability rate is just 3%.”

In the Western Corridor, “the recovery was mainly influenced by high levels of demand for large areas since the available supply remains high. This has also been one of the areas that has benefited most from the lack of supply in the centre of Lisbon, attracting many companies looking for large spaces,” the executive said in a statement.

In the remaining Lisbon office areas, the pace of rent increases has been less pronounced. For example, in Prime CBD, which remains the most expensive area, rents stood at 19 euros/m²/month in the third quarter of this year, a cumulative increase of 4% over the last four years.

In the CBD, current rents are 15 euros/m²/month, an increase of 3% in cumulative terms, and in the Historical Zone and Ribeirinha, rents increased by 7% to 15 euros/m²/month. The New Office Zone was the only area that did not register significant increases, maintaining prime rents of 15 euros/m²/month.

Mariana Rosa also explained that “the trend of progressive and transversal growth for the entire market, especially since 2015, is expected to continue. The rates of increases are different because of a balance between supply and demand in each of the regions, although it should also be noted that the areas where rents fell the most between 2007 and 2013 are those where recovery has been quicker.”

Demand for office space in Lisbon remains strong

Companies continue to seek out spaces to set up offices in Lisbon, sustaining the need for work areas in the capital.

JLL alone was responsible for the placement of 34,600 m2. The consultancy believes that demand will continue unabated: “On the one hand, companies are more confident in the economy, looking to expand their offices or upgrade their existing facilities. On the other, there is also a growing demand by multinational companies that want to centralise their back office services and call centres.

Lisbon is also increasingly associated with entrepreneurship, and there is thus “an enormous potential demand for office space by Portuguese and foreign start-ups. Pipedrive, a start-up based in Estonia, recently chose Lisbon to set up its third largest office. The deal, which we took part in, is demonstrative of the current demand profile.”

Finding spaces to meet demand is a challenge for the sector. Companies are looking for modern spaces, with large areas per floor and in centrally located areas close to public transport. That is why it is vital that the development of new office space should accelerate as quickly as possible, ” Rosa concluded.

Original Story: Vida Imobiliária – Ana Tavares

Translation: Richard Turner