Logistics and shopping centres buoy investment in Portugal’s commercial real estate market in 2024

 In Commercial Real Estate, Logistics, Multinationals, News, Offices, Real Estate Asset Management, Real estate investment, Shopping Centres

The shopping centres and logistics segments of Portugal’s commercial real estate market are proving extremely resilient for investors according to the real estate magazine Vida Imobiliária.

“Capital markets are very often influenced by international trends flagged up by consultants and ‘gurus’ in the futures markets that correspond to extreme views about some markets that are very often not only general but very often wrong”, states the magazine.

In fact, in the US and in an Anglo-Saxon market the impact of e-commerce has been over inflated, with many experts dictating the decline of physical commerce and the death of shopping centres.

Investors were scared and fled from investing in shopping centres, leading to a fall in yields and a reduction in shopping centre transaction volumes all over Europe.

“The star segment of the investment market for so many years was suddenly almost seen as synonymous with toxic assets. But the Iberian reality is quite demonstratively the opposite”, it states.

With professionalism, shopping centres have been able to overcome the difficult years of the pandemic, and, in the meantime, they have not only recovered but have already surpassed the pre-Covid years in sales and rental volumes, appearing better and more buoyant than ever.

In 2024, transactions from large and medium-sized shopping centres returned to pre-crisis levels with yields that attracted the investment market for assets that have always had a profound impact and relevance in attracting international investors to Portugal.

According to WIRE Portugal, the commercial real estate investment landscape in Portugal showed a more dynamic trend than in 2023, and the year achieved a better performance and signs of recovery, with investment volumes approximating and even surpassing €2Bn, representing a y-o-y increase of 22%.

Nevertheless, 2024 was expected to be a modest year, especially when compared with the investment volumes observed in 2018, 2019 and 2022, when the investment turnover exceeded €3Bn according to Marta Vieira Lourenço of DILS Portugal.

In 2024, the volume of investment transactions in income-generating real estate is estimated to reach €2.170 million, a significant year-on-year increase of 28%, with expression in the second half of the year.

Consultants Cushman & Wakefield reports that in 2024, the volume of investment transactions in income-generating real estate is estimated to reach €2.170 million, a significant year-on-year increase of 28%, with particular expression in the second half of the year.

There was greater investor interest in the retail sector, which accounted for half of the total volume invested, and in the hospitality sector, which represented nearly a quarter of the total.

In terms of occupancy, the office sector registered significant increases in absorption volumes in the two main cities of the country, namely an impressive 120% in Greater Lisbon and 33% in Greater Porto.

Still in terms of occupancy, the retail sector maintained an upward trend, especially noticeable in future retail park offerings and the number of new openings, which registered a 15% increase compared to the previous year.

The industrial and logistics market’s occupational activity registered a year-on-year increase of 36% in the first three quarters of 2024, ending the period 19% above the annual total for 2023.

The hospitality sector maintained a positive performance throughout 2024, with a cross-sectional increase in key indicators, despite the natural slowdown in growth rates. Until October, total revenues grew by 10% compared to the same period last year.

According to Eric van Leuven, C&W Portugal MD, “2024 was a year of recovery in a global context of falling interest rates, with greater dynamism in the real estate market (especially in the second half of the year).

In Portugal, after a first half with reduced activity, there was a significant growth in commercial real estate investment in the second half, thus closing the year with a significant increase compared to 2023.

Regarding the take-up market, there were year-on-year increases in absorption volumes in all sectors, with special emphasis on the office sector in Greater Lisbon, which reached the second highest absorption value of the last decade.”