Offices Leases at 9-Year High

7 January 2018

A rapidly improving economy is attracting new companies and demand for larger areas. But supply is limited.

“Excellent”, “spectacular”, “expanding” and “sustainable growth.” Praise for the Portuguese real estate market’s performance is never-ending, and better, more and more data is confirming the good times. An announcement was made in the last week of 2017 that it had been the best year since 2009 in terms of the volume of residential properties sales. This week, numbers were published showing that the commercial real estate market also broke some records last year.

According to analyses by Cushman & Wakefield and JLL, both real estate consultancies, 170,000 square meters (m2) of offices were leased in Greater Lisbon in 2017, a volume that is 20% higher than the 141,000 m2 in the previous year. Cushman also stated that the figure is “the third highest” since they began analysing this market segment. The volume of leased office space was the highest since 2008.

In addition, companies, whether they were opening new offices or moving facilities, opted for larger areas of 1,000 sqm or more, which shows that they are growing and hiring – and not just in Lisbon. Examples include the VdA (Vieira de Almeida & Associados) law firm, which leased the 12,000-square-meter Sorel Building in the Lisbon neighborhood of Santos; Abreu Advogados, which moved to a 5,800-square-meter building next to Santa Apolónia, also in the capital; Teleperformance, the call centre firm, which leased 4,000 sqm in the Arrábida Building, in Vila Nova de Gaia; and Vestas, the Danish wind turbine maker that took up 3,000 m2 in the Lionesa Business Centre in Matosinhos.

Lack of Offices

“The market is good, the economy is good, companies are confident, new companies are arriving come, and others are expanding. In addition, shared services, technical services and contact centres, firms that require a lot of space, are all growing in Portugal and are even beginning to appear outside of Portugal’s principal cities, Lisbon and Porto,” Eric van Leuven, Cushman’s general director, told Expresso. But he also warned the market and the good moment that it is experiencing is under “threat,” as there are fewer and fewer quality spaces available. “We still have an 8% availability rate [of offices to rent], but they have small areas and either require works or are in poor locations,” he explained.

In addition, there are “very few new buildings under construction,” even though there are several empty or abandoned lots in the city, such as the old Feira Popular in Entrecampos and a parcel of land in Campolide, near the Amoreiras, for which there had been a project for residential and office areas, but that was shelved years ago. “There are only a few buildings still available in the Western Corridor [A5 Lisbon – Cascais], around Parque das Nações and in the third Colombo Tower,” he says, and many already have guaranteed renters. According to JLL’s accounts, over the next two years, 105,000 sqm of office space will be built, but Cushman’s figures are more conservative – only 70,000 sqm. And of these, 20,000 sqm are already under contract, that is, they won’t even go on the market. “I hope developers will start building more to meet the shortage,” Mr van Leuven continued.

Original Story: Expresso – Ana Baptista

Photo: Jose Caria

Translation: Richard Turner