Lisbon office take-up could fall 30% in 2020
Property consultants Worx fear that the office take-up market in Portugal’s capital will be down as much as 30% this year, closing 2020 with take-up of just 130,000 m2.
The forecast was made in Worx’s last report which analysed transitional activity in the Lisbon market in the 1st half of 2020 during which time some 84,433 m2 was leased out, a downward trend like-for-like of 23% on the first half of 2019. It is a figure which the consultants argue “still reflects the pre-Covid period.”
In terms of accumulated volume take-up in the first quarter (43,934 m2) it had been the highest since Worx began doing quarterly and half-year property studies. However, from March onwards, when the State of Emergency kicked in and the pandemic imposed restrictions uncertainty set in and decisions to rent office space were either postponed or have been dragged out. The result has been a fall in the number of deals closed for the half (-41% on the same period in 2019).
Bucking the forecasts estimated at the start of the year, an increase in the rate of office availability in the market is also expected, inverting the downward trajectory that had been seen since 2013 because of the high level of demand, achieving a historic minimum of around 5.3% at the end of 2019. Backing up the current forecast is new office stock coming onto the market and space becoming vacant after the confinement period with the vacancy rate rising in the first half to 6.3%
“The expectation this year is that we will witness a negative variation in the order of 30% on take-up, with around 130,000 m2 of volume take-up. In 2021 we should see a similar variation, returning to an average growth of around 20% over the next three years. “From 2020 to 2024 the vacancy rate should see a growth trend, rising by around 7% until the end of 2020 due to a reduction in office space on the part of companies with an eye to reducing costs and/or because they are opting for teleworking. From 2021 the vacancy rate should climb by around 9%, stabilising in 2024, while the take-up will follow a ‘Nike Swoosh’ recovery (a stuttering comeback over a long period of time) to 2024,” says Pedro Salema Garção, Head of Agency at Worx.
According to Worx, there is around 204,900 m2 of new stock under construction to 2022, of which 19,181 m2 (9.4%) is now being completed. To this can also be added building projects that have yet to start and which make up another 91,950 m2 in the pipeline, bringing the total expected new office stock to 309,578 m2.
As to prime rental prices, which has also seen a gradual increase in recent years, for now these are stable remaining at around €24/m2/month in the second quarter.