€2Bn property investment for 2021
Portugal’s real estate sector could see investments of around €2Bn of commercial property transactions by the end of 2021.
Despite a fall in investment turnover in the first half of the year by nearly 70%, “all the signs point to a gradual improvement in the Covid-19 situation, the positive effects of which will filter through to the market this year,” says Cushman & Wakefield in its latest study for commercial real estate investment in Portugal.
Estimates for investment turnover by the end of 2021 predict around €2.2Bn in transactions, a fall of 23% on 2020. Nevertheless, if this amount is reached it would still be the fourth best year in terms of transactions on record for the Portuguese market.
Paulo Sarmento, Partner and Director of Cushman & Wakefields Capital Markets department highlights the “continued strong interest of overseas investors in the Portuguese market”.
“Not only do key market players recognise the effective way in which the country has tackled the pandemic, but they are also aware of high levels of liquidity. This investment appetite is more polarised, with a strong preference for assets in prime locations, with good contracts and reliable tenants,” he says.
Regarding property assets on the periphery of cities or ones which have a less stable revenue stream, Sarmento says it is much harder to reconcile the price expectations of buyers and sellers.
Cushman & Wakefield states that on closer analysis of each segment, it is clear that investors are choosing the office market which attracted 43% of the total investment in the first half of 2021.
Other sectors tended to attract institutional investors (32%) while investment in retail assets have plummeted to the second lowest capital allocation of the last decade: just 15% of investment was directed at retail assets.
“International investor interest is increasingly focused on the areas of logistics and residential which generate income. Unfortunately, we don’t have lots of assets in these categories in Portugal, which explains the low volume of investment in these categories to date,” explains Paulo Sarmento.
According to Cushman & Wakefield’s forecasts, big ticket deals will be more evident in the second half of 2021 with hotel assets in focus. If all the deals currently in the pipeline go through, the hospitality market will enjoy a healthy allocation of capital in 2021 of around 35%.
As for 2022, the consultants predict a return to pre-pandemic investment levels. “Today, we can pinpoint around €800 million of deals with a high probability of going through in 2022. Taking into account this new market reality, in which off-market deals are becoming more frequent and it is probable that we will see investment turnover at close to €3Bn,” concludes Paulo Sarmento.