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Real Estate Investment to Exceed €1.5 Billion in Second Semester

23 October 2017

Real estate investment should exceed 1.5 billion euros in the second half of the year, setting a record for the Portuguese market.

According to the latest WMarket study of the real estate market in the first half of the year, by the real estate consultancy Worx, investments in the Portuguese commercial real estate market came in at slightly over one billion euros. 60% of the deals carried out concerned assets with an investment value of more than 100 million euros.

The study also revealed that the profitability rates that have reached record levels and the recovery of the country’s economic credibility have helped to position Portugal as a favoured destination for the financial recuperation of several international players. Opportunistic investors, who appeared in the post-crisis environment, are now being joined by more traditional, focused investors, who willing to pay higher amounts.

Although the size of the Portuguese market is smaller compared to other competitive European markets, the risk/return and available offerings have led to a positive and attractive outcome. The domestic market for commercial investment, which is heavily concentrated in Lisbon, is clearly recovering, with growth and opportunities for various types of investors.

In the first half of the year, the retail segment led the market with investments of 400 million euros. Although that figure represents a decrease of 17.5% compared to the same period in 2016, the retail market promises to continue to be a focus of investments by some of the leading international and regional players. The sale of Forum Coimbra, Fórum Viseu and Vila do Conde Style Outlet, which accounted for 88% of the investment market for this segment, should be joined by the sale of other significant assets.

The increase in rental yields, the recovery of consumer confidence inherent to the slow but more robust economic recovery, the hegemony of the shopping centres, the maturity and quality of the brands present in Portugal, are the basis of the segment’s superior performance.

The office segment, with a total semi-annual investment volume of 298 million euros, decreased by 36% compared to the same period of 2016, but significant deals in the second semester are expected to increase the totals for the year.

In the area of Industry & Logistics, the sale of 16 Logicor assets to the China Investment Corporation for approximately 260 million euros, powered one of the leading market trends: the bet on logistics assets justified in part, by the growth of e-commerce.

Foreign investors

The report by Worx goes on to say that the Portuguese market continues to be dominated by Real Estate Investment Funds and foreign capital, with 90% of the total investment volume traded in the first half of 2017 carried out by international investors. South Africa debuted for the first time in Portugal, with the purchase of the Forum Coimbra and Forum Viseu by Greenbay and Resilient. The diversity of investors’ nationalities is an ever-present reality in Portugal, and traditional heavyweights (United Kingdom, France, Germany, Spain) are now joined by new nationalities, outside of Europe (South Africa, China, United States).

Prime yields continue to remain under pressure. Given the historically low-interest rates and the attractiveness of returns in real estate investments when compared traditional financial products and public debt, the real estate market has offered a higher and safer opportunity for capital appreciation.

Original Story: Diário Imobiliário

Translation: Richard Turner