Investors drive lower office and retail property prices

 In News, Property, Real Estate

Economic uncertainty is likely to fuel a drop in rental income for office and retail space by between five and 10%.

The downward price pressure is being driven by the perception of risk from economic uncertainty in the fallout from the Covid-19 pandemic on both real estate offices and retail premises.
In order to buy, investors now want to offset their risk, which translates into a downwards adjustment in price.
According to a survey of investors by consultants JLL, 73% of those asked admit that yields (income obtained from the asset) on offices will increase in the short term while 69% forecast a similar situation for retail.
Nevertheless, “That doesn’t mean going on the cheap” says Fernando Ferreira who heads JLL’s capital markets department, because yields were at historic lows fairly below the peak of 2012 when Portugal was suffering the height of that economic financial crisis.
“This current price squeeze is a natural consequence of an uncertain economic scenario, despite investor interest in Portugal remaining strong”.

General real estate prices

According to several news sources over the past week, real estate overall in Portugal is unlikely to suffer a significant fall in prices in the coming weeks because Portugal is getting a lot of interest from international investors.
And according to the President of AICCOPN, (Association of Civil Construction Industries and Public Works and the CPCI (Portuguese Confederation of Construction and Real Estate), Manuel Reis Campos, “Portugal continues to be a destination of excellence when it comes to attracting investors from overseas with the pandemic not having significant effects.”
“I was always against the excessive climate of speculation over property prices in Porto and Lisbon. The fall in prices will not be significant or widespread” he says, pointing out that: “This doesn’t mean that there won’t be good business opportunities when prices stabilise as was the case in the last months of 2019.”
Reis Campos adds that both the real estate and construction sectors were “enjoying a new growth cycle” in 2019.
In Q1 of this year Portugal’s office segment in the real estate market attracted around €247 million of investment while retail attracted €798 million. In terms of general projected real estate investment for 2020, investors have shown an appetite for up to €7Bn in the Portuguese market going forward, particularly from private equity funds.