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Portuguese real estate sets records in 2018

Published on 02/01/2019

The Portuguese real estate market recorded a record turnover in 2018, boosted by the commercial real estate segment, according to a JLL report released on Wednesday.

According to the property consultant, the commercial segment accounted for an investment volume of €3.3 billion.

JLL reports that, “for offices, occupancy is expected to have reached 210,000 m2, a peak for the last decade and very close to the highest market peak in the past 20 years, that was reached in 2008.”

In the housing segment, the number of properties sold increased 19% and national prices rose above 10%, led by a 20% rise in Lisbon, the company reported.

“The real estate market once again surprised us in 2018, above all by the intensification of the pace of completions, exceeding the previous year’s activity levels which already were very high – reaching records in many segments,” said Pedro Lancastre, CEO of JLL Portugal.

“At the moment, supply is a real embarrassment to a greater acceleration of activity, as supply can not keep up with the latent demand,” adds Lancastre.

In the commercial segment, the report stresses that the €3.3 billion investment represents a 74% growth over 2017, the year that held the previous record of €1.9 billion and practically equals, “the total sum invested in the seven years between 2008 and 2014.”

Retail space accounted for 45% of the commercial business transacted in 2018, then offices at 24%. As for buyer nationality, 94% were non-Portuguese.

Foreigners also accounted for 57% of JLL’s domestic property sales, which “remain very dynamic, with more than 41 nationalities buying houses in Lisbon, Porto and Cascais (in the premium segment sold by JLL), led by the British at 13% and the French at 11%.

According to Lancastre, 2019 will be the year for larger construction projects of offices, shops, hotels and housing, all of which will help to supply the continuing increase in demand.

“The pipeline of new developments coming on the market, both for homes and offices, will of course be more robust this year and will strengthen in the next, but still we are far from the building levels that were registered a decade ago. It is absolutely crucial to accelerate the construction of new properties, otherwise the market will not be able to keep pace with the demand and it will lose the momentum in the long-term,” warns Lancastre.

In addition to standard commercial investment, there is the possibility of a new investment vehicle, the Real Estate Investment Trust, which allows small and medium-sized investors into the real estate market. This would increase the amount capital available (and drive property prices higher still.)

In addition, the portfolios of real estate assets and bad loans held by banks also can liven up the market in 2019, as well investor attention in alternative assets in the areas of health, sports and specialised residences,” concludes Lancastre.